<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 1-8094
SEAGULL ENERGY CORPOATION
(Exact name of registrant as specified in its charter)
Texas 74-1764876
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1001 Fannin,Suite 1700
Houston, Texas 77002-6714
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area Code: (713) 951-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $.10 per share New York Stock Exchange
Preferred Stock, par value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 day. YES X NO
<PAGE> 2
Indicate by check mark if disclosuere of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 20, 1995, the aggregate market value of the outstanding
shares of Common Stock of the Company held by non-affiliates (based on the
closing price of these shares on the New York Stock Exchange) was approximatley
$640,491,550.
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock, as of the latest practicable date.
Class Outstanding at March 20, 1995
Common Stock, par value $.10 per share 36,123,702
DOCUMENTS INCORPORATED BY REFERENCE
Document
(1) Annual Report to Shareholders for Part of Form 10-K
year ended December 31, 1994 PARTS I and II
(2) Proxy Statement for Annual Meeting PART III
of Shareholders to be held on
May 15, 1995
<PAGE> 3
PART I
ITEM 1. BUSINESS
Seagull Energy Corporation (the "Company" or "Seagull") is an
independent energy company primarily engaged in natural gas exploration,
development and production. The Company's operations are focused offshore
Texas and Louisiana in the Gulf of Mexico and onshore in three principal
geographic regions: (i) the Mid-Continent Region located in western Oklahoma
and the Texas Panhandle; (ii) the Mid-South Region, primarily in the Arklatex
area in eastern Texas and northern Louisiana and the Arkoma Basin in eastern
Oklahoma and western Arkansas; and (iii) western Canada. Seagull's two other
business segments are also natural gas related: (i) pipeline and marketing,
which include natural gas supply, marketing and transportation, principally in
the southwestern United States; pipeline transportation of hydrocarbon products
and petrochemicals in Texas and Louisiana; pipeline engineering, design,
construction and operation; and natural gas processing in Texas; and (ii)
natural gas transmission and distribution in Alaska. The Company was
incorporated in Texas in 1973 as a wholly owned subsidiary of Houston Oil &
Minerals Corporation ("HO&M"). In March 1981, the Company became an
independent entity as a result of the spin-off of its shares to the
stockholders of HO&M. The "Company" or "Seagull" refers to Seagull and its
consolidated subsidiaries, unless otherwise indicated or the context otherwise
suggests.
For financial information relating to industry segments, see Note 13
of Notes to Consolidated Financial Statements of Seagull Energy Corporation and
Subsidiaries. The Consolidated Financial Statements of Seagull Energy
Corporation and Subsidiaries and the Notes related thereto (the "Consolidated
Financial Statements") are included in the Company's 1994 Annual Report to
Shareholders and as part of Exhibit 99.1 attached hereto. Prior to 1994, the
Company derived no revenues and had no material assets outside the United
States. See discussions below regarding the Seagull Canada Acquisition and
interests in production licenses acquired in United Kingdom waters.
EXPLORATION AND PRODUCTION
Seagull's exploration and production ("E&P") segment is the Company's
primary growth area and is comprised of the following material direct and
indirect wholly owned subsidiaries of the Company: Seagull Energy E&P Inc.;
HO&M; Wacker Oil Inc.; Seagull Midcon Inc.; Seagull Mid-South Inc., formerly
Arkla Exploration Company; Seagull Energy Canada Ltd. and Seagull Energy Canada
Holding Company.
On January 4, 1994, an indirect wholly owned subsidiary of Seagull
acquired all of the outstanding shares of stock of Novalta Resources Inc.
("Novalta") from Novacor Petrochemicals Ltd. (the "Seagull Canada
Acquisition"). Effective as of the January 4, 1994 Closing Date, Novalta was
amalgamated with Seagull Energy Canada Ltd., the indirect subsidiary of Seagull
that acquired Novalta. The resulting amalgamated company was named Seagull
Energy Canada Ltd. ("Seagull Canada").
Seagull Canada's assets (the "Seagull Canada Properties") consist
primarily of natural gas and oil reserves and developed and undeveloped lease
acreage concentrated principally in a small number of fields located in
Alberta, Canada. According to reserve estimates prepared as of December 31,
1993 by the independent petroleum engineering firm, DeGolyer and MacNaughton,
the Seagull Canada Properties had proved reserves totaling 257.4 billion cubic
feet ("Bcf") of natural gas and 2.8 million barrels ("MMbbl") of oil,
condensate and natural gas liquids.
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In 1993, a four-company exploration group including Seagull was
awarded four production licenses in United Kingdom waters. Those awards,
together with the purchase of additional interests, gave Seagull interests in
four licenses in U.K. waters totaling 458,798 gross (97,854 net) acres.
Seismic studies and other evaluation activities on the licensed blocks have
been ongoing since mid-1993. During 1994, one well was successfully tested for
hydrocarbons, a second unsuccessful well was completed and a third well was in
progress at year-end. The 1995 drilling program calls for three additional
wells to be drilled in the United Kingdom waters.
Seagull's ongoing exploration program has been concentrated in the
Gulf of Mexico, primarily in shallow waters off the central Texas Gulf Coast.
The Company has in the past financed its gas and oil exploration and
development activities through internally generated funds, bank borrowings and
participation by industry partners on a prospect-by-prospect basis. The
Company believes that its gas and oil exploration and development activities in
the foreseeable future will be financed by internally generated funds. In
1995, the Company expects E&P capital expenditures to total approximately $112
million. Of this amount, about $48 million will be devoted to exploration,
primarily in the Gulf of Mexico, $49 million to development and $15 million to
leasehold acquisition. Of the expected development capital expenditures, about
$13 million is targeted for the Mid-South Region, $13 million for the Gulf of
Mexico, $10 million for the Mid-Continent Region and $13 million for Western
Canada. By comparison, 1994 capital expenditures for E&P activities totaled
$136 million. The Company expects to fund these capital expenditures from
internally generated funds but may reduce capital expenditure levels if
economic conditions dictate.
Revenues from the sale of gas and liquids production accounted for
64%, 60% and 38% of the Company's consolidated revenues for 1994, 1993 and
1992, respectively. As used in this Annual Report on Form 10-K, liquids means
oil, condensate and natural gas liquids, unless otherwise indicated or the
context otherwise suggests. Gas production in 1994 increased primarily as a
result of contributions attributable to the Seagull Canada Properties acquired
in January 1994 and to production flowing for the first time in late 1993 and
early 1994 from certain of the Company's discoveries. Production of gas and
liquids for 1994 averaged 355.2 million cubic feet ("MMcf") per day ("MMcf/d")
and 5,063 barrels ("Bbl") per day ("Bbl/d"), respectively, compared to 279.5
MMcf/d and 4,641 Bbl/d, respectively, in 1993.
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Seagull's principal gas and oil properties include the following:
<TABLE>
<CAPTION>
Average Net Daily Production
for the Year Ended
At December 31, 1994 December 31, 1994
____________________ ____________________________
Proved
Number of Reserves Natural Gas Liquids
Field State Gross Wells (Bcfe)(1) (MMcf) (Bbl)
________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
UNITED STATES:
Mid-South Region:
Arklatex Area:
Carthage Texas 233 174 24.8 487
Oak Hill Texas 49 21 4.8 28
Waskom Texas 73 60 17.8 164
Ruston Louisiana 39 49 15.8 126
Sligo Louisiana 50 15 4.9 41
Arkoma Basin:
Cecil Arkansas 208 68 21.6 -
Aetna Arkansas 110 35 12.4 -
Wilburton Oklahoma 59 24 12.0 -
Other 464 105 43.5 485
Mid-Continent Region:
Panhandle West Texas 68 49 14.6 6
Panhandle Gray Texas 133 28 0.2 651
Watonga-Chickasha Oklahoma 156 39 13.8 98
Strong City Oklahoma 110 32 14.2 122
Other 316 73 22.4 388
Offshore Texas 44 53 53.8 240
Offshore Louisiana 12 37 18.3 443
Gulf Coast Onshore 17 19 6.2 614
_________________________________________________________
2,141 881 301.1 3,893
CANADA (2) 787 292 54.1 1,170
_________________________________________________________
2,928 1,173 355.2 5,063
=========================================================
</TABLE>
(1) The equivalent of one billion cubic feet ("Bcfe") of natural gas.
Liquids are converted to gas at a ratio of one barrel of liquids per
six Mcf ("Mcf" represents one thousand cubic feet) of gas, based on
relative energy content.
(2) The Seagull Canada Properties were acquired on January 4, 1994 in
connection with the Seagull Canada Acquisition. Average net daily
production amounts assume the Seagull Canada Acquisition occurred on
December 31, 1993.
For additional information relating to the Company's gas and oil
reserves, based substantially upon reports of Netherland, Sewell & Associates,
Inc., DeGolyer and MacNaughton and Ryder Scott Company, independent petroleum
engineers (collectively the "Engineers"), see Note 4 of the Consolidated
Financial Statements included in the Company's 1994 Annual Report to
Shareholders and as part of Exhibit 99.1 attached hereto. The Engineers
provided the estimates of "proved developed and undeveloped reserves" and
"proved developed reserves" at the beginning and end of each of the three years
included in Note 4. Under "Standardized Measure of Discounted Future Net Cash
Flows" in Note 4, the Engineers provided all information except "discounted
income taxes" and "standardized measure of discounted future net cash flows".
All information in Note 4 not provided by the Engineers was supplied by the
Company. As required, Seagull also files estimates of gas and oil reserve data
with various governmental regulatory authorities and agencies. The basis for
reporting reserves to these authorities and agencies, in some cases, may not be
comparable. However, the difference in estimates does not exceed 5%.
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The future results of this segment will be affected by the market
prices of natural gas and liquids. The availability of a ready market for gas
and liquids products in the future will depend on numerous factors beyond the
control of the Company, including weather, production of other natural gas and
liquids products, imports, marketing of competitive fuels, proximity and
capacity of gas and liquids pipelines and other transportation facilities, any
oversupply or undersupply of gas and liquids products, the regulatory
environment and other regional and political events, none of which can be
predicted with certainty. As in the past, the Company would expect to continue
curtailing a portion of its gas production whenever prices are deemed to be
below acceptable levels. Gas prices declined steadily throughout the year
after hitting levels of $2.19 per Mcf domestically and $1.89 per Mcf in Canada
during the first quarter. The low point was in the fourth quarter, when gas
prices averaged $1.59 per Mcf in the U.S. and $1.33 per Mcf in Canada. Average
prices for the full year came to $1.88 per Mcf domestically and $1.55 per Mcf
in Canada.
GAS AND OIL DRILLING ACTIVITIES
Seagull's gas and oil exploratory and developmental drilling
activities are as follows for the periods indicated. Totals shown in each
category include wells completed as productive wells and wells abandoned as dry
holes. A well is considered productive for purposes of the following table if
it justifies the installation of permanent equipment for the production of gas
or oil. A well is deemed to be a dry hole if it is determined to be incapable
of commercial production. The term "gross wells" means the total number of
wells in which Seagull owns an interest, while the term "net wells" means the
sum of the fractional working interests Seagull owns in gross wells.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------
Gross Net Gross Net Gross Net
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES:
Exploratory Drilling:
Productive Wells 5 3.23 8 5.19 3 1.28
Dry Holes 10 6.48 19 9.20 12 5.51
Development Drilling:
Productive Wells 119 69.34 100 54.62 24 16.11
Dry Holes 11 5.11 22 13.71 2 0.73
CANADA:
Exploratory Drilling:
Productive Wells 5 1.67 - - - -
Dry Holes 1 0.33 - - - -
Development Drilling:
Productive Wells 110 54.95 - - - -
Dry Holes 1 0.50 - - - -
OTHER INTERNATIONAL:
Exploratory Drilling:
Dry Holes 2 0.53 - - - -
</TABLE>
From January 1, 1995 through February 28, 1995, the Company drilled 2
gross (2.00 net) successful exploratory wells and 4 gross (1.52 net) dry
exploratory wells. In addition, the Company drilled 17 gross (10.00 net)
successful development wells. The Company has 5 gross (2.38 net) exploratory
wells and 16 gross (6.48 net) development wells in progress or being evaluated.
As of the beginning of 1995, the Company had an inventory of approximately 85
exploratory prospects, including about 20 in Canada.
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PRODUCTION
The following table summarizes the Company's production, average sales
prices and lifting costs for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
UNITED STATES:
Net Production:
Gas (MMcf) 109,900 102,025 38,137
Oil and condensate (Mbbl)(1) 1,204 1,412 1,014
Natural gas liquids (Mbbl) 217 282 265
Combined (MMcfe)(2) 118,427 112,188 45,809
Average sales price (3):
Gas (per Mcf) $ 1.88 $ 1.99 $ 1.85
Oil and condensate (per Bbl) $15.98 $ 16.72 $18.60
Natural gas liquids (per Bbl) $ 9.45 $ 11.10 $10.20
Combined (per Mcfe) (2) $ 1.90 $ 2.03 $ 2.01
Average lifting costs of gas and liquids (per Mcfe) (4) $ 0.44 $ 0.47 $ 0.57
CANADA(5):
Net Production:
Gas (MMcf) 19,755 -- --
Oil and condensate (Mbbl) 324 -- --
Natural gas liquids (Mbbl) 103 -- --
Combined (MMcfe) 22,317 -- --
Average sales price :
Gas (per Mcf) $ 1.55 -- --
Oil and condensate (per Bbl) $ 12.67 -- --
Natural gas liquids (per Bbl) $ 8.12 -- --
Combined (per Mcfe) $ 1.66 -- --
Average lifting costs of gas and liquids (per Mcfe) $ 0.51 -- --
</TABLE>
(1) Thousands of Bbl ("Mbbl").
(2) The equivalent of one thousand cubic feet ("Mcfe") and one million
cubic feet ("MMcfe") of natural gas.
(3) Average sales prices are before deduction of production, severance,
and other taxes.
(4) Lifting costs represent costs incurred to operate and maintain wells
and related equipment and facilities. These costs include, among
other things, repairs and maintenance, workover expenses, labor,
materials, supplies, property taxes, insurance, severance taxes and
transportation costs.
(5) The Seagull Canada properties were acquired on January 4, 1994 in
connection with the Seagull Canada Acquisition.
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<PAGE> 8
The following table sets forth information regarding the number of
productive wells in which the Company held a working interest at December 31,
1994. Productive wells are either producing wells or wells capable of
commercial production although currently shut in. One or more completions in
the same borehole are counted as one well.
<TABLE>
<CAPTION>
Gross Net
--------------------- ----------------------
United United
States Canada States Canada
------ ------- ------ -------
<S> <C> <C> <C> <C>
Gas (*) 1,885 772 940.86 407.54
Oil 256 15 179.44 10.32
----- ----- -------- ------
Total 2,141 787 1,120.30 417.86
===== ===== ======== ======
</TABLE>
(*) Includes 328 gross (162.76 net) and 439 gross (296.50 net) gas wells
with multiple completions for the United States and Canada,
respectively.
For additional information relating to gas and oil producing
activities, see Note 4 of the Consolidated Financial Statements included in the
Company's 1994 Annual Report to Shareholders and as part of Exhibit
99.1 attached hereto.
DEVELOPED AND UNDEVELOPED GAS AND OIL ACREAGE
As of December 31, 1994, the Company owned working interests in the
following developed and undeveloped gas and oil acreage:
<TABLE>
<CAPTION>
Developed Undeveloped
--------------------------- ---------------------------
Gross Net (1) Gross Net (1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
UNITED STATES:
Onshore:
Oklahoma 312,748 128,517 92,827 45,079
Arkansas 225,651 68,875 29,453 20,870
Texas 160,642 84,092 22,606 8,908
Louisiana 51,339 22,897 10,968 3,032
Mississippi 17,370 7,837 16,652 7,284
Other 18,151 11,907 6,721 4,720
Bays and State Waters 1,694 846 6,999 6,011
Federal Offshore:
Texas 145,144 64,557 176,590 140,015
Louisiana 49,658 26,269 78,942 55,409
CANADA 399,171 202,410 462,578 273,792
UNITED KINGDOM - - 458,798 97,854
--------- ------- --------- -------
1,381,568 618,207 1,363,134 662,974
========= ======= ========= =======
</TABLE>
(1) When describing acreage on drilling locations, the term "net" refers
to the total acres on drilling locations in which the Company has a
working interest, multiplied by the percentage working interest owned
by the Company.
Additionally, as of December 31, 1994, the Company owned mineral
and/or royalty interests in 222,768 gross (31,568 net) developed and 297,508
gross (45,789 net) undeveloped gas and oil acreage.
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COMPETITION
The Company's competitors in gas and oil exploration, development,
production and marketing include major oil companies, as well as numerous
independent oil and gas companies, individuals and drilling programs. Some of
these competitors have financial and personnel resources substantially in
excess of those available to the Company and, therefore, the Company may be
placed at a competitive disadvantage. The Company's success in discovering
reserves will depend on its ability to select suitable prospects for future
exploration in today's competitive environment.
MARKETS
Most industry observers believe there currently exists a very delicate
balance between supply and demand of natural gas in North America. Since
mid-1994, however, the average market price for natural gas has been
significantly weakened due to a real or perceived oversupply situation caused
by many factors such as (i) reduced demand due to milder than normal weather,
(ii) new deliverability from wells recently drilled in the favoring price
environment of the last two years, (iii) additional volumes imported from
Canada, and (iv) more "efficiency" in the nation's pipeline and storage grid
stimulated by open-access competition under FERC Order 636. The Company
believes that while the current conditions in the market may persist for a
while, the long-term fundamentals still favor natural gas as the "fuel of
choice" for an increasing share of the market.
REGULATION
UNITED STATES
Aspects of the production, sale and transportation of natural gas and
crude oil in federal Outer Continental Shelf waters are regulated pursuant to
various federal statutes, including the Outer Continental Shelf Lands Act. The
interstate transportation of natural gas is regulated under the Natural Gas Act
("NGA") or the Natural Gas Policy Act of 1978 ("NGPA").
Operations conducted by the Company on federal gas and oil leases must
comply with numerous statutory and regulatory restrictions. Additionally,
certain operations must be conducted pursuant to appropriate permits issued by
government agencies, such as the Bureau of Land Management and the Minerals
Management Service of the Department of Interior and, in regard to certain
federal leases, prior approval of drill site locations must be obtained from
the Environmental Protection Agency.
In all states in which the Company engages in gas and oil exploration
and production, its activities are subject to regulation. These regulations
generally require permits for the drilling, the prevention of waste of gas and
oil reserves, the prevention and cleanup of pollution and other matters.
Government agencies in various states regulate, among other things, the amount
and rate of gas and oil production. The states of Texas and Oklahoma have
recently revised their regulations regarding production allowables. The
regulations imposed by state agencies affect deliverability under certain of
the Company's gas purchase contracts and thereby affect the purchasers'
volumetric purchase obligations. In addition to changing the allowables,
Oklahoma has promulgated regulations pursuant to Senate Bill 168, which govern
sharing of gas markets among working interest owners and disbursement of
royalty proceeds.
Over the past several years, the Federal Energy Regulatory Commission
(the "FERC") has issued certain orders that have brought sweeping changes to
the regulatory structure governing interstate sales and
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<PAGE> 10
transportation of natural gas. Collectively, these orders have changed the gas
pricing structure and altered the traditional relationship among producers,
pipelines and end-use markets. Most pipelines are in the process of
transforming themselves from their strictly-merchant role to a combination of
merchant and open-access transporter. Producers frequently contract directly
with end-users or other gas buyers and transportation services can be arranged
by either the buyer, the seller or a broker on a first-come, first-serve basis.
These FERC orders therefore provide the Company with greater marketing options.
CANADA
Seagull Canada has exploration and development operations in Alberta
and Saskatchewan. The natural gas and oil industry is subject to extensive
controls and regulations imposed by various government entities in Canada.
Natural Gas Pricing
Prior to deregulation of natural gas markets, prices in Canada were
legislated by the government. In the current deregulated environment, the
price of natural gas is determined by negotiations between buyers and sellers.
Exports of natural gas require approvals similar to those required for exports
of oil, as described below.
Crude Oil Pricing
Since June 1, 1985, producers of oil have been entitled to negotiate
sales contracts directly with oil purchasers. Oil exporters are entitled to
export oil pursuant to contracts, the terms of which do not exceed one year in
the case of light crude and two years in the case of heavy crude, provided that
an order approving the export has been obtained from the Natural Energy Board
("NEB"). Any export to be made pursuant to a contract of a longer duration
requires the exporter to obtain a license from the NEB, and the issuance of
such a license requires the approval of the Governor General in Council.
Provincial Royalties and Incentives
The royalty regime is a significant factor in the profitability of gas
and oil production. Royalties payable on production from lands other than
Crown lands are determined by negotiations between the mineral owner and the
lessee. Crown royalties are determined by government regulation and are
generally calculated as a percentage of the value of the gross production; the
rate of royalties payable depends in part on well productivity and field
discovery date. From time to time the governments of Canada, Alberta and
Saskatchewan have established incentive programs which have included royalty
rate reductions, royalty holidays and tax credits for the purpose of
encouraging gas and oil exploration.
In November 1991, the Government of Alberta announced temporary
royalty incentives for oil exploration and development. The relief program
provides for: (i) a two year royalty holiday for exploratory oil wells drilled
between November 1, 1991 and March 31, 1992 and a one year royalty holiday for
exploratory wells drilled between April 1, 1992 and March 31, 1993 and an extra
one year royalty holiday for exploratory wells drilled in the foothills and
northern regions of the Province, with a cap of $1 million per well; (ii) a one
year royalty holiday on development oil wells drilled between November 1, 1991
and March 31, 1993 with a cap of $400,000 per well; (iii) a five year royalty
holiday for reactivated oil wells which obtained a well license prior to July
30, 1993 and which have been continuously inactive since August 31, 1990, with
a 25,000 barrel cap which was raised to 50,000 barrels pursuant to the October
13, 1992 announcement; and (iv) new oil royalty rates for reactivated wells.
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On October 13, 1992, the Government of Alberta announced major changes
to its royalty structure and permanent incentives for exploring and developing
gas and oil reserves. The regulations incorporating these changes were adopted
on January 20, 1993. The significant changes announced include the following:
(i) new oil discovered after September 30, 1992 will have a permanent one year
oil royalty holiday, subject to a maximum of $1 million and a reduced royalty
rate thereafter; (ii) reduction of royalties on existing production of gas and
oil; (iii) incentives by way of royalty holidays and reduced royalties on
reactivated and horizontal wells; (iv) introduction of separate par pricing for
light, medium and heavy oil; and (v) modification of the royalty formula
structure to provide for sensitivity to price fluctuations.
Effective January, 1994 the Government of Alberta introduced
administrative changes to the Gas Royalty System. The intent of this change is
to reduce administrative costs incurred by industry and government.
A price and productivity sensitive royalty structure for natural gas
and crude oil in the Province of Saskatchewan has been in effect since 1987.
The royalty structure provides for royalty holidays for certain categories of
wells drilled in the Province of Saskatchewan and royalties which vary with the
price of a particular commodity.
For a description of regulation of environmental matters affecting
Seagull Canada, see Environmental Matters below.
PIPELINE AND MARKETING
Seagull is involved in the pipeline transportation of natural gas,
hydrocarbon products and petrochemicals in Texas, Louisiana and Mississippi.
In addition, the Company is engaged in pipeline engineering, design,
construction and operation, natural gas processing, third-party natural gas
marketing and the marketing of Seagull's natural gas and liquids production.
Revenue from the pipeline and marketing segment accounted for 10%, 11% and 16%
of the Company's consolidated revenues for 1994, 1993 and 1992, respectively.
GAS PIPELINES
The Company owns and operates short and medium length gathering
pipelines that carry gas from producing fields to other pipelines which are
owned by utility companies, large gas transmission companies, or others, and to
industrial customers (referred to herein collectively as "Gas Purchasers").
The Company owns and operates 21 onshore and offshore natural gas gathering
systems having an aggregate length of approximately 396 miles. Seagull's gas
pipelines, which do not form an interconnected system, are principally located
in Texas, Louisiana and offshore along the Texas coast. In addition, the
Company owns partial interests in and operates two other offshore gas
pipelines.
Seagull transports gas under arrangements where customers are charged
a fee for gas carried through Seagull's pipelines. Seagull also delivers gas
through its pipelines pursuant to contracts whereby it purchases and resells
gas. In the case of purchase and sales contracts, the margin between Seagull's
cost of gas and its resale revenues constitutes, in effect, a transportation
fee.
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<PAGE> 12
Natural gas producers prefer flexibility in commitment of gas reserves
both as to term and pricing. Some of the wells connected to the Company's
pipelines are not dedicated to those pipelines. It is probable that most gas
wells currently connected to the Seagull gas gathering systems will remain
connected from year-to-year with deliverability of reserves declining until
depleted. In many situations, it is no longer practical for a major pipeline
company to consider gas reserves to be firmly committed to its facilities.
Several systems are located in good prospective gas development areas where
some new gas wells have been drilled, and more development may occur. In areas
of active drilling, it is likely that new wells and additional gas volumes can
be added to the systems.
The following table shows the volumes of gas transported for
the periods shown:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Volume (MMcf):
Sales Contracts 634 1,419 2,290
Transportation Fee Arrangements 100,416 112,081 69,660
------- ------- ------
Total 101,050 113,500 71,950
======= ======= ======
</TABLE>
HYDROCARBON PRODUCTS AND PETROCHEMICAL PIPELINES
The Company owns and/or operates pipelines for the transportation of
liquid hydrocarbon products and petrochemicals. Seagull operates seven such
pipelines, three of which it owns and all of which are located in Texas or
Louisiana.
GAS MARKETING
The Company actively provides marketing services geared toward
matching gas supplies available in the major producing areas with attractive
markets available in the Midwest, Northeast, Mid-Atlantic, Appalachian and
Texas/Louisiana Gulf Coast areas. The matching process includes arranging
transportation on a network of open-access pipelines on a firm or interruptible
basis.
Marketing profit margins are often small due to competition, and
results can vary significantly from month to month. Large amounts of working
capital are involved for relatively small net margins, which makes working
capital management critical. The Company has policies and procedures in place
that are designed to minimize any potential risk of loss from these
transactions. These policies and procedures are reviewed and updated
periodically by the Company's management.
PIPELINE OPERATIONS AND CONSTRUCTION
Seagull operates certain pipelines owned by other companies. In some
cases the operating agreements provide for reimbursement of expenses incurred
in connection with operation plus a profit margin. In other cases the Company
receives a negotiated annual fee.
The Company also builds pipelines for other companies for which it
receives construction fees that are fixed, cost plus or a combination of both.
The Company recognized operating profit in 1994 and 1993 on a gas pipeline
construction project. The project was completed in the first quarter of 1994.
10
<PAGE> 13
Historically, the Company has not been engaged in pipeline
construction projects on a regularly recurring basis. Seagull had no other new
construction projects in 1994; however, Seagull is currently conducting
marketing efforts and anticipates it will generate new projects.
GAS PROCESSING
The Company owns interests in a number of gas processing plants. The
largest of the plants is located in Matagorda County, Texas (the "Matagorda
Plant"), and has been in operation since March 1981. Seagull owns a 65%
undivided interest in and operates the Matagorda Plant, and the other 35%
interest is owned by a subsidiary of Enron Corp.
The Matagorda Plant processes natural gas, producing a full-range
demethanized raw mix products stream. The actual throughput at the Matagorda
Plant varies depending upon gas sales demand and production-related mechanical
factors. For the year ended December 31, 1994, throughput averaged
approximately 252 MMcf/d, which was slightly lower than the prior year.
Throughput volumes are expected to remain at the same level for the foreseeable
future. Profitability will depend largely on the relative prices of products
and natural gas.
COMPETITION
The Company actively competes with numerous other companies for the
construction and operation of short and medium length pipelines. The Company's
competitors include oil companies, other pipeline companies, natural gas
gatherers and petrochemical transporters, many of which have financial
resources, staffs and facilities substantially larger than those of the
Company. In addition, many of the Company's Gas Purchasers are also
competitors or potential competitors in the sense that they have extensive
pipeline-building capabilities and experience and generally operate large
pipeline systems of their own. Seagull believes that its ability to compete
will depend primarily on its ability to complete pipeline projects quickly and
cost effectively, and to operate pipelines efficiently.
The Company's gas marketing activities are in competition with
numerous other companies offering the same services. Some of these competitors
are affiliates of companies with extensive pipeline systems that are used for
transportation from producers to end-users. The Company believes its ability
to compete depends upon building strong relationships with producers and
end-users by consistently purchasing and supplying gas at competitive prices.
REGULATION
Government regulation has a significant effect on various segments of
the Company's pipeline operations. Its pipeline systems are regulated by state
and federal regulatory agencies with respect to safety, location and other
matters.
The FERC has jurisdiction over, among other things, the construction
and operation of pipelines and related facilities used in the transportation,
storage and sale of natural gas in interstate commerce. The FERC also has
jurisdiction over the rates and charges levied by companies subject to the NGA
for the transportation of natural gas in interstate commerce and for the sale
of natural gas for resale in interstate commerce. At the Company's request,
FERC has decertified the Company's former interstate facility and it is no
longer subject to NGA jurisdiction.
11
<PAGE> 14
Sales of natural gas by the Company's marketing subsidiary are
generally not regulated by the FERC. Transportation and sales for resale of
gas in interstate commerce by some of the Company's intrastate pipelines are
regulated by the FERC pursuant to Section 311 of the NGPA. Section 311 permits
intrastate pipelines to engage in certain transactions with interstate
pipelines and their customers without being regulated as interstate pipelines
under the NGA, thus allowing more flexibility in operations between intrastate
and interstate gas pipeline companies. The FERC has revised its Section 311
regulations to allow intrastate pipelines to transport gas destined for
interstate commerce under self-implementing blanket certificates.
In April 1992, the FERC issued its Order No. 636 (and related orders),
which basically requires interstate pipelines to "unbundle" or separate their
transportation services from their merchant sales of gas. This permits
end-users of gas to contract directly with producers to purchase gas and to
contract separately with pipelines for transportation services. As the
interstate pipelines began operating under Order No. 636 during 1993, new
opportunities were created throughout the industry. While it remains difficult
to predict the ultimate impact Order No. 636 will have on the Company, new
opportunities to market and transport natural gas are being explored by the
Company. The extensive regulatory proceedings required under this order have
not directly affected the Company's pipelines significantly to date.
With regard to pipeline design, construction, operation and
maintenance, state regulatory commissions generally have the authority to take
all steps necessary to ensure compliance by intrastate pipeline and gathering
companies with applicable safety regulations. The FERC also regulates certain
aspects of intrastate pipeline construction related to Section 311
transportation or storage services. The Company is also subject to safety
regulations imposed by the Office of Pipeline Safety of the Department of
Transportation (the "DOT"), promulgated pursuant to the Natural Gas Pipeline
Safety Act of 1968 and enforced by the Texas Railroad Commission.
Pursuant to regulations regarding drug abuse enacted by the DOT and
adopted by the Texas Railroad Commission, the Company has implemented a drug
abuse prevention program that strives for a safe and drug-free workplace for
its employees.
ALASKA TRANSMISSION AND DISTRIBUTION
The Company operates in Alaska through ENSTAR Natural Gas Company
("ENG"), a division of the Company, and Alaska Pipeline Company ("APC"), an
Alaska corporation and a wholly owned subsidiary of the Company. ENG and APC
are currently operated as a single business unit, ENSTAR Alaska ("ENSTAR
Alaska"), and are regulated as a single operating unit by the Alaska Public
Utilities Commission (the "APUC"). APC engages in the intrastate transmission
of natural gas in South-Central Alaska. ENG engages in the distribution of
natural gas in Anchorage and other nearby communities in Alaska and is APC's
only customer. Revenues from the natural gas transmission and distribution
segment accounted for 26%, 29% and 46% of the Company's consolidated revenues
for 1994, 1993 and 1992, respectively.
ENSTAR Alaska's predecessor was formed in 1959 and began serving the
Anchorage area with natural gas in 1961. Five years later, in 1966, the
predecessor became one of the original entities that formed Alaska Interstate
Company, a newly organized public company the shares of which were traded on
the New York Stock Exchange. Alaska Interstate Company changed its name to
ENSTAR Corporation in 1982.
12
<PAGE> 15
In 1985, the Company purchased ENSTAR Alaska for $55 million in cash
plus $10 million in the form of a seven-year unsecured, 10% subordinated note.
At the time of the acquisition, APC had outstanding debt of approximately $65
million. The transaction received the final approval of the APUC in June 1985.
GAS TRANSMISSION SYSTEM
APC owns and operates the only natural gas transmission lines in its
service area that are operated for utility purposes. The pipeline transmission
system is composed of approximately 277 miles of 12- to 20-inch diameter
pipeline and approximately 71 miles of smaller diameter pipeline. The system's
present design delivery capacity is approximately 410 MMcf/d. The average
throughput of the system in 1994, 1993 and 1992 was 121, 110 and 112 MMcf/d,
respectively.
GAS DISTRIBUTION SYSTEM
ENG distributes natural gas through approximately 1,962 miles of gas
mains to approximately 90,100 residential, commercial, industrial and electric
power generation customers within the cities and environs of Anchorage, Eagle
River, Palmer, Wasilla, Soldotna, Kenai and the Nikiski area of the Kenai
Peninsula, Alaska. During the year ended December 31, 1994, ENG added
approximately 46 miles of new gas distribution mains, installed 1,886 new
service lines and added approximately 1,900 net customers. ENG anticipates
relatively modest growth in its residential customer base and will install
additional main and service lines to accommodate this growth.
ENG distributes gas to its customers under tariffs which provide for
varying delivery priorities. ENG's business is seasonal with approximately 65%
of its sales made in the first and fourth quarters of each year.
In 1994, purchase/resale volumes represented 71% of ENG's throughput.
The remaining volumes are transported for power and industrial customers for a
transportation fee. Purchase/resale volumes accounted for 91% of ENG's
operating margin in 1994.
ENG's five largest customers are Municipal Light and Power ("ML&P"),
an electric utility; the U. S. Air Force; the U. S. Army; the State of Alaska;
and Unocal Corporation. Together, they account for about $7.3 million in
annual operating margin and about 16 Bcf per year in volumes, which represent
about 14% and 37%, respectively, of ENG totals.
GAS SUPPLY
In May 1988, APC entered into a gas purchase contract (the "Marathon
Contract") with Marathon Oil Company ("Marathon") providing for the delivery of
approximately 450 Bcf of gas in the aggregate. The Marathon Contract is a
"requirements" contract with no specified daily deliverability or annual
take-or-pay quantities. APC has agreed to purchase and Marathon has agreed to
deliver all of APC's gas requirements in excess of those provided for in other
presently existing gas supply contracts, subject to certain exceptions, until
the commitment has been exhausted and without limit as to time; however,
Marathon's delivery obligations are subject to certain specified annual
limitations after 2001. The contract has a base price of $1.55 per Mcf plus
reimbursements for any severance taxes and other charges. The base price is
subject to annual adjustment based on changes in the price of certain traded
oil futures contracts. During 1994, the cost of gas purchased under the
Marathon Contract averaged $1.67 per Mcf, including reimbursements for
severance taxes. The Marathon Contract, as amended in 1991, has been
approved by the APUC.
13
<PAGE> 16
Effective January 1, 1992, APC amended a gas purchase contract with
Shell Oil Company and ARCO Alaska, Inc. (the "Shell Contract") to extend the
term of the contract through the year 2009, modify the price, delivery and the
deliverability provisions and provide procedures for reducing take-or-pay
volumes for the effect of APC sales volumes that are displaced by gas sales
made by others. The Shell Contract provides for the delivery of up to
approximately 220 Bcf of gas. The amendments revised the price to a base price
of $1.971 per Mcf plus reimbursements for any severance taxes and an annual
adjustment based on changes in the price of certain traded oil futures
contracts from the relevant base price. Certain portions of the gas purchased
under the amendments may be priced under a pricing term similar to the Marathon
Contract. The 1994 price under the Shell Contract, after application of
contractual adjustments, averaged $1.71 per Mcf, including reimbursements for
severance taxes. The amendments provide for varying deliverability, before
displaced gas sales adjustments, up to a maximum of 110 MMcf/d through 1995,
and take-or-pay quantities, before displaced gas sales adjustments, up to a
maximum of 15.4 Bcf per year through 1994 (15 Bcf per year thereafter). The
Shell Contract, as amended, has been approved by the APUC.
Combined, the Marathon and Shell Contracts will supply all of ENSTAR
Alaska's gas supply requirements through the year 2001. After that time
supplies will still be available under these contracts in accordance with their
terms, but the annual limitations contained in the Marathon Contract will begin
to take effect. As a result, after 2001, at least a portion of ENSTAR Alaska's
requirements are expected to be satisfied outside the terms of those contracts,
as currently in effect.
Based on gas purchases during the twelve months ended December 31,
1994, which are not necessarily indicative of the volume of future purchases,
gas reserves committed to APC under the Marathon and Shell Contracts would have
a current reserve life index of approximately 14 years.
ENSTAR Alaska's average cost of gas sold in 1994, 1993 and 1992 was
$1.74, $2.07 and $1.94 per Mcf, respectively. The average price of gas sold by
ENSTAR Alaska in 1994, 1993 and 1992 was $3.23, $3.56 and $3.41 per Mcf,
respectively.
As stated above, ENSTAR Alaska purchases all of its natural gas under
long-term contracts in which the price is indexed to changes in the price of
crude oil futures contracts. However, because ENSTAR Alaska's sales prices are
adjusted to include the projected cost of its natural gas, there has been and
is expected to be little or no impact on margins derived from ENSTAR Alaska's
gas sales as a result of fluctuations in oil prices due to worldwide political
events and changing market conditions.
ENSTAR Alaska has no material take-or-pay obligations and does not
anticipate any such obligations in the foreseeable future.
COMPETITION
ENSTAR Alaska competes primarily with municipal and cooperative
electric power distributors and with various suppliers of fuel oil and propane
for the available energy market. There are also extensive coal reserves
proximate to ENSTAR Alaska's operating area; however, such reserves are not
presently being produced.
During the last six years, ENSTAR Alaska's natural gas volumes
delivered on a purchase/resale basis have declined primarily due to three of
its major customers electing to purchase gas directly from gas producers.
During 1988, Chugach Electric Association, the smallest of the three customers,
entered into a contract to purchase gas directly from a producer. The contract
became effective on April 1, 1989, resulting in a
14
<PAGE> 17
displacement of gas sales at that time of approximately 2.6 Bcf per year.
ENSTAR Alaska currently continues to transport approximately 1.3 Bcf per year
of Chugach Electric Association's gas volumes, although at a lower fee than the
margin earned on sales volumes because of the proximity of the customer's
facility to a producing field and a producer-owned pipeline. The remaining 1.3
Bcf of natural gas required by Chugach Electric Association in 1989 was
displaced by a 90-megawatt hydroelectric facility at Bradley Lake, completed in
September 1991.
During the fourth quarter of 1991, ML&P, the largest of the three
customers, began purchasing gas directly from three gas producers, which
displaced gas sales of approximately 8.0 Bcf per year. However, the APUC
approved a tariff allowing ENSTAR Alaska to transport these volumes from ML&P's
purchase points to the ML&P electric generation facilities for a transportation
fee that approximates the margin that would have been earned had ML&P remained
a sales customer rather than becoming a transportation customer. Deliveries of
gas to ML&P during 1994, 1993 and 1992 amounted to approximately 17%, 18% and
19%, respectively, of the total deliveries of gas by ENSTAR Alaska.
In December 1994, the Department of Defense awarded a one-year
contract to a gas producer to supply natural gas to the power plants located on
two military bases that were then gas sales customers of ENSTAR Alaska. The
contract became effective February 1, 1995 and displaced gas sales of
approximately 4.7 Bcf per year. However, ENSTAR Alaska and the gas producer
have entered into an agreement whereby ENSTAR Alaska transports these volumes
from the producer's facilities to the military power plants for a
transportation fee equal to the margin that would have been earned had the
military power plants remained a sales customer. Consequently, ENSTAR Alaska
anticipates no significant adverse economic impact to result from this matter.
The transportation agreement between ENSTAR Alaska and the gas producer has
been approved by the APUC.
If any other existing large customer of ENSTAR Alaska chooses to
purchase gas directly from producers, ENSTAR Alaska would expect to collect a
fee for transporting that gas equivalent to the margin earned on sales volumes
for those customers because the large distance of remaining user facilities
from producing fields would preclude the by-pass of ENSTAR Alaska's pipelines.
ENSTAR Alaska supplies natural gas to its customers at prices that at
the present time economically preclude substitution of alternative fuels.
Since the Shell Contract and the Marathon Contract include prices that
fluctuate based on oil indices, a competitive margin favoring natural gas over
oil-based energy sources is expected to continue. However, there is no
assurance that the competitive advantage over other alternative fuels will not
be reduced or eliminated by the development of new energy technology or by
changes in the price of oil or refined products.
REGULATION
The APUC has jurisdiction as to rates and charges for gas sales,
construction of new facilities, extensions and abandonments of service and
certain other matters. Rates are generally designed to permit the recovery of
the cost of providing service, including purchased gas costs, and a return on
investment in plant. APC and ENG are regulated by the APUC on a combined basis
as though they were a single entity. Because ENSTAR Alaska's operations are
wholly intrastate, ENSTAR Alaska is not subject to or affected by Order 636 or
any other economic regulation by the FERC.
As a result of a proceeding filed in 1984, which was concluded in May
1986, the APUC granted ENSTAR Alaska an aggregate rate increase of 20.27% and
authorized a regulatory rate of return on common
15
<PAGE> 18
equity of 15.65%. ENSTAR Alaska has no significant regulatory issues pending
before the APUC. Since its inception in 1961, ENSTAR Alaska has
participated in only three formal rate proceedings.
The Company is a "public utility company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act").
Accordingly, if any "company" (as defined for purposes of the 1935 Act and
therefore including so-called "organized groups") becomes the owner of 10% or
more of the Company's outstanding voting stock, that company would be required
to register as a "holding company" under the 1935 Act, in the absence of an
exemption of the type described below. Section 9(a)(2) also requires a person
(including both individuals and "companies") to obtain prior approval from the
Securities and Exchange Commission (the "SEC") in connection with the
acquisition of 5% or more of the outstanding voting stock of a public utility
if that person is also the owner of 5% or more of the outstanding voting stock
of another public utility.
In March 1991, the Company filed in good faith with the SEC an
application pursuant to Section 2(a)(8) of the 1935 Act, seeking a
determination that Seagull was not subject to regulation as a "subsidiary
company" of FMR Corp. (the "FMR Application"), which was then the owner of
2,805,624 shares (approximately 12.5% at such time) (shares adjusted for a
2-for-1 stock split of all the issued shares of the Company's common stock (the
"Common Stock"), effected June 4, 1993) of the outstanding Common Stock. Under
the 1935 Act, a company is a "subsidiary company" of a "holding company" if the
"holding company" owns 10% or more of the total voting power of the "subsidiary
company", unless the SEC determines otherwise. Based upon the most recent
information furnished to the Company by FMR Corp., FMR Corp. was the beneficial
owner (albeit within the meaning of Section 13(d) of the Securities Exchange
Act of 1934) of 2,760,074 shares, which is approximately 8% of the Common Stock
as of February 13, 1995. However, although FMR Corp.'s ownership and control,
within the meaning of the 1935 Act, has fallen below 10% of the outstanding
voting stock of the Company, the Company does not currently intend to withdraw
the FMR Application.
In December 1993, Seagull filed in good faith with the SEC an
additional application pursuant to Section 2(a)(8) of the 1935 Act, seeking a
determination that the Company was not subject to regulation as a "subsidiary
company" of AXA Assurances I. A. R. D. Mutuelle, AXA Assurances Vie Mutuelle,
Alpha Assurances I. A. R. D. Mutuelle, Alpha Assurances Vie Mutuelle, Uni
Europe Assurance Mutuelle and AXA (collectively, the "Mutuelles AXA") and The
Equitable Companies Incorporated ("Equitable") and their respective affiliates
(collectively, the "Equitable Entities"), (the "Equitable Application"). At
such time, the Equitable Entities beneficially owned 4,495,600 shares
(approximately 12.5%) of Common Stock. Based upon the most recent information
furnished to the Company by the Equitable Entities, the Equitable Entities were
the beneficial owners (albeit within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) of 2,721,800 shares, which represents
approximately 8% of the Common Stock as of February 10, 1995. However,
although the Equitable Entities' ownership and control has fallen below 10% of
the outstanding voting stock of the Company, the Company does not currently
intend to withdraw the Equitable Application.
Even if FMR Corp. or the Equitable Entities held 10% or more of the
outstanding voting stock of the Company, as a result of its good faith filing
of the two applications, the Company currently would not be subject to any
obligation, duty or liability imposed by the 1935 Act, unless and until the SEC
enters an order denying or otherwise adversely disposing of the applications.
To date, no such order has been issued. The Company believes that the FMR
Application and the Equitable Application ultimately should be granted.
16
<PAGE> 19
ENVIRONMENTAL MATTERS
Seagull, as an owner and operator of gas and oil properties, is
subject to various federal, state, local and foreign country laws and
regulations relating to discharge of materials into, and protection of, the
environment. These laws and regulations may, among other things, impose
liability on the lessee under an gas and oil lease for the cost of pollution
clean-up resulting from operations, subject the lessee to liability for
pollution damages, require suspension or cessation of operations in affected
areas and impose restrictions on the injection of liquids into subsurface
aquifers that may contaminate groundwater. For a discussion of the Gulf Coast
Vacuum Site matter, see Legal Proceedings below.
Seagull Canada's gas and oil operations are largely regulated by the
Energy Resources Conservation Board for the province of Alberta and the
Department of Energy and Mines for the province of Saskatchewan. These bodies
enforce legislation which regulates all aspects of exploration, development and
production, including the licensing of wells, pipelines and facilities.
Environmental legislation provides for restrictions and prohibitions on
releases or emissions of various substances produced in association with
certain gas and oil industry operations. In addition, legislation requires
that well and facility sites must be abandoned and reclaimed to the
satisfaction of provincial authorities, typically to pre-disturbance quality.
A breach of such legislation may result in the imposition of fines and
penalties.
Seagull has made and will continue to make expenditures in its efforts
to comply with these requirements, which it believes are necessary business
costs in the gas and oil industry. Although environmental requirements do have
a substantial impact upon the energy industry, generally these requirements do
not appear to affect Seagull any differently or to any greater or lesser extent
than other companies in the industry.
Seagull maintains insurance coverages which it believes are customary
in the industry, although it is not fully insured against all environmental
risks. The Company is not aware of any environmental claims existing as of
December 31, 1994, which would have a material impact upon the Company's
financial position or results of operations. Seagull does not believe that
compliance with federal, state, local or foreign country provisions regulating
the discharge of materials into the environment, or otherwise relating to the
protection of the environment, will have a material adverse effect upon the
capital expenditures, earnings or competitive position of the Company or its
subsidiaries, but there is no assurance that changes in or additions to laws or
regulations regarding the protection of the environment will not have such an
impact. Seagull has established policies that provide for continuing
compliance with environmental laws and regulations, as well as operational
procedures designed to limit the environmental impact of its field facilities.
EMPLOYEES
As of February 28, 1995, the Company had 759 full time employees. In
addition to the services of its full time employees, the Company employs, as
needed, the services of consulting geologists, engineers, regulatory
consultants, contract pumpers and certain other temporary employees.
ENSTAR Alaska operates under collective bargaining agreements with
separate bargaining units for operating and clerical employees. These units
represent approximately 70% of ENSTAR Alaska's work force. Contracts effective
April 1, 1992 were negotiated that set wages and work relationships extending
to April 1, 1995 for the clerical bargaining unit and until April 1, 1996 for
the operating bargaining unit. The Company is not a party to any other
collective bargaining agreements. The Company has never had a work stoppage.
17
<PAGE> 20
The Company considers its relations with its employees to be
satisfactory.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, each of whom has been elected
to serve until his or her successor is elected and qualified, are as follows:
<TABLE>
<CAPTION>
Years Served Years in
As Executive Current
Name Age Officer Position Positions
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barry J. Galt 61 11 11 Chairman of the Board,
President and Chief
Executive Officer
John W. Elias 54 2 - Executive Vice President and
Chief Operating Officer
Robert W. Shower 57 3 1 Executive Vice President and
Chief Financial Officer
Richard F. Barnes 51 7 7 President of ENSTAR Natural Gas
Company (a division of the
Company) and Alaska Pipeline
Company (a subsidiary of the
Company)
John N. Goodpasture 46 13 2 President, Seagull Pipeline &
Marketing Company (a subsidiary
of the Company) and Senior
Vice President, Pipelines
T. P. McConn 61 6 2 President, Seagull Energy
E&P Inc. (a subsidiary of
the Company) and Senior
Vice President, Exploration and
Production
Rodney W. Bridges 45 5 2 Vice President and Controller
Janice K. Hartrick 42 2 2 Chief Counsel and Vice President,
Environmental Affairs
Robert M. King 34 5 2 Vice President, Corporate
Development and Treasurer
</TABLE>
The business experience of each of the executive officers named above
who has held the position(s) set forth opposite his or her name for less than
five years, is as follows:
Mr. Elias joined the Company as Executive Vice President in April 1993
and was named Executive Vice President and Chief Operating Officer in January
1995. For the previous 30 years, he served in a variety of positions for Amoco
Production Company and its parent, Amoco Corporation, most recently as Group
Vice President of Worldwide Natural Gas for Amoco Production Company.
18
<PAGE> 21
Mr. Shower joined the Company as Senior Vice President and Chief
Financial Officer in March 1992 and was named Executive Vice President of the
Company in December 1993. He served as Senior Vice President, Corporate
Development for Albert Fisher, Inc. from 1991 to February 1992. From 1990 to
1991, he was Vice President and Chief Financial Officer with AmeriServ Food
Company. From 1986 to 1990, he served as a Managing Director, Corporate
Finance, for Lehman Brothers Inc., formerly Shearson Lehman Hutton Inc.
Mr. Goodpasture joined the Company and has been an executive officer
since 1981 and was named President of Seagull Pipeline Company in March 1990
and Senior Vice President, Pipelines, in December 1992. Most recently, he was
named President of Seagull Pipeline & Marketing Company in June 1994.
Mr. McConn was named Vice President, Exploration and Production of the
Company in January 1990 and President of Seagull Energy E&P Inc. in March 1991.
In December 1992, he was named Senior Vice President, Exploration and
Production.
Mr. Bridges joined the Company as Corporate Controller in August 1990,
and was named Vice President and Controller in December 1992. From 1988 to
1990, he was Corporate Controller for TransAmerican Natural Gas Corporation.
Ms. Hartrick joined Seagull as Staff Counsel in 1987 and became Chief
Counsel in 1989. She was named Chief Counsel and Vice President, Environmental
Affairs in December 1992.
Mr. King joined the Company as Treasurer in August 1990, and was named
Vice President, Corporate Development and Treasurer in December 1992. From
1986 to 1990, he was with Mellon Bank, where he served as Vice President in the
Energy Division.
ITEM 2. PROPERTIES
Incorporated herein by reference to Item 1 of this Annual Report on
Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
Gulf Coast Vacuum Site. On March 19, 1993, Franks Petroleum, Inc.
("Franks") submitted a claim to Seagull Mid-South Inc., a subsidiary of the
Company ("Seagull Mid-South"), for a portion of Franks' costs incurred in
connection with the Gulf Coast Vacuum Services Superfund Site (the "GCV Site")
in Vermilion Parish, Louisiana. The United States Environmental Protection
Agency Region 6 (the "EPA") currently is seeking the cleanup of the GCV Site
under the authority of the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA").
Franks previously has been identified as a potentially responsible
party at the GCV Site as a result of Franks' arrangements with the former
operator of the GCV Site to transport wastes from various oil and gas leases
owned or operated by Franks in trucks owned by the GCV Site operator. Franks'
claim against Seagull Mid-South asserts that some of the wastes hauled by the
GCV Site operator on behalf of Franks came from a gas well owned by Seagull
Mid-South.
On February 9, 1993, the EPA also sent a notice to Houston Oil &
Minerals Corporation, a subsidiary of the Company, indicating that HO&M may be
a potentially responsible party at the GCV Site. Based upon the Company's
investigation of this claim, the Company believes that the basis for HO&M's
alleged liability is a
19
<PAGE> 22
series of transactions between HO&M and the operator of the GCV Site that
occurred during 1979 and 1980, long before Seagull acquired HO&M.
The EPA's cleanup cost estimate of the GCV Site is in the range of $17
million, although other unofficial estimates indicate the cost may be higher.
Under certain circumstances, liability under CERCLA is joint and several,
although parties whose liability is joint and several have contribution rights
against each other under CERCLA. Nevertheless, if Seagull Mid-South and/or
HO&M is found to be a responsible party at the GCV Site, the Company believes
that its liability is unlikely to be material to its financial condition or its
results of operations because of the large number of potentially responsible
parties at the GCV Site and the relative amount of contamination, if any, that
may have been caused at the GCV Site by the disposal of wastes arising from the
wells identified in the claims.
Other. The Company is a party to ongoing litigation in the normal
course of business or other litigation with respect to which the Company is
indemnified pursuant to various purchase agreements or other contractual
arrangements. Management regularly analyzes current information and, as
necessary, provides accruals for probable liabilities on the eventual
disposition of these matters. While the outcome of lawsuits or other
proceedings against the Company cannot be predicted with certainty, management
believes that the effect on its financial condition or results of operations,
if any, will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
20
<PAGE> 23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
A. The Company's Common Stock (the "Common Stock") is traded on
the New York Stock Exchange under the ticker symbol SGO. The
high and low sales prices on the New York Stock Exchange
Composite Tape for each quarterly period during the last two
fiscal years were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
High(*) Low(*)
----------------------------------------------------------------------------
<S> <C> <C> <C>
1993
First Quarter 24 1/2 14 7/8
Second Quarter 30 22 7/8
Third Quarter 32 7/8 24
Fourth Quarter 31 1/4 21
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
High Low
----------------------------------------------------------------------------
<S> <C> <C> <C>
1994 First Quarter 28 5/8 23 5/8
Second Quarter 29 3/4 23
Third Quarter 28 5/8 22 3/4
Fourth Quarter 26 17 5/8
----------------------------------------------------------------------------
</TABLE>
(*) Prices have been adjusted to reflect a two-for-one split of
Common Stock effected June 4, 1993.
B. As of March 10, 1995, there were approximately 2,830 holders
of record of Common Stock.
C. Seagull has not declared any cash dividends on its Common
Stock since it became a public entity in 1981. The decision
to pay Common Stock dividends in the future will depend upon
the Company's earnings and financial condition and such other
factors as the Company's Board of Directors deems relevant.
The Company's credit agreement (the "Credit Agreement")
restricts the Company's declaration or payment of dividends on
and repurchases of Common Stock unless each of the following
tests have been met and after making such dividend payment
such tests continue to be met: (i) aggregate dividend
payments attributable to ENSTAR Alaska Stock must not exceed
$20 million plus 100% of the net income of ENSTAR Alaska on a
cumulative basis from January 1, 1994, (ii) aggregate dividend
payments, other than those permitted under (i) above or on up
to $150 million in preferred stock, must not exceed $20
million plus 33 1/3% of the net income of the Company
(excluding net income of ENSTAR Alaska) on a cumulative basis
from January 1, 1994 plus 100% of the net income of ENSTAR
Alaska on a cumulative basis for such period less any dividend
payments allowed under (i) above, (iii) the aggregate amount
of outstanding loans under the Credit Agreement, together with
all other senior indebtedness of Seagull and its subsidiaries
(excluding Alaska Pipeline Company ("APC")) then outstanding,
must not exceed the Borrowing Base and (iv) no Default or
Event of Default shall have occurred and be continuing. The
foregoing restrictions do not apply to dividends payable
solely in the form of additional shares of Common Stock or to
dividends payable on up to $150
21
<PAGE> 24
million of preferred stock. The capitalized terms used herein
to describe the restrictions contained in the Credit Agreement
have the meanings assigned to them in the Credit Agreement.
Under the most restrictive of these tests, as of December 31,
1994, approximately $27.5 million was available for payment of
dividends (other than the stock dividends described above) or
repurchase of Common Stock. In addition, certain debt
instruments of APC restrict the ability of APC to transfer
funds to the Company in the form of cash dividends, loans or
advances. For a description of such restrictions, reference
is made to Note 6 of the Consolidated Financial Statements
included in the Company's 1994 Annual Report to Shareholders
and as part of Exhibit 99.1 attached hereto.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference to the Selected Financial Data
included in the Company's 1994 Annual Report to Shareholders and as part of
Exhibit 99.1 attached hereto.
22
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference to Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's 1994 Annual Report to Shareholders and as part of Exhibit 99.1
attached hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference to the Consolidated Financial
Statements and Supplementary Data included in the Company's 1994 Annual Report
to Shareholders and as part of Exhibit 99.1 attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
23
<PAGE> 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to "Election of Directors" included
in the Proxy Statement for the Company's Annual Meeting of Shareholders to be
held on May 15, 1995 (the "Proxy Statement"). See also "Executive Officers of
the Company" included in Part I of this Annual Report on Form 10-K, which is
incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to "Election of Directors--Executive
Compensation--Summary Compensation Table", "--Compensation Arrangements,"
"--Option Exercises and Fiscal Year-End Values," "--Option Grants,"
"--Executive Supplemental Retirement Plan," "--ENSTAR Natural Gas Company
Supplemental Retirement Plan" and "--ENSTAR Natural Gas Company Retirement
Plan"; and "Election of Directors-Compensation of Directors" included in the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to "Principal Shareholders" and
"Election of Directors--Security Ownership of Directors and Management"
included in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to "Election of Directors--Certain
Transactions" included in the Proxy Statement.
24
<PAGE> 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
The following Consolidated Financial Statements and Independent
Auditors' Report thereon are included in the Company's 1994 Annual Report to
Shareholders and as part of Exhibit 99.1 attached hereto, and are incorporated
herein by reference:
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. SCHEDULES:
All schedules have been omitted because the required information is
insignificant or not applicable.
3. EXHIBITS:
3.1 Articles of Incorporation of the Company, as
amended, including Articles of Amendment filed May
12, 1988, May 21, 1991, and May 21, 1993 with the
Secretary of State of the State of Texas, that
certain Statement of Relative Rights and
Preferences related to the designation and
issuance of the Company's $2.25 Convertible
Exchangeable Preferred Stock, Series A, filed
August 6, 1986 with the Secretary of State of the
State of Texas and that certain Statement of
Resolution Establishing Series of Shares of Series
B Junior Participating Preferred Stock of Seagull
Energy Corporation filed March 21, 1989 with the
Secretary of State of the State of Texas
(incorporated by reference to Exhibit 3.1 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
3.2 Bylaws of the Company, as amended through January
30, 1990 (incorporated by reference to Exhibit 3.2
to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
4.1 Note Agreement dated June 17, 1985 by and among
APC and The Travelers Insurance Company, The
Travelers Life Insurance Company, and the
Equitable Life Assurance Society of the United
States (collectively, the "Insurance Companies")
(including forms of notes and other exhibits
thereto) and Inducement Agreement of even date
therewith by and among Seagull and the Insurance
Companies (including exhibits thereto)
(incorporated by reference to Exhibit 4.1 to
Annual Report on Form 10-K for the year ended
December 31, 1990).
4.2 Form of Consent and Agreement dated April 15, 1991
by and among APC and the Insurance Companies
(including exhibits thereto) (incorporated by
reference to Exhibit 4.2 to Annual Report on Form
10-K for the year ended December 31, 1992).
25
<PAGE> 28
4.3 Rights Agreement dated as of March 17, 1989
between the Company and NCNB Texas National Bank,
as Rights Agent, which includes the form of
Statement of Resolution setting forth the terms of
the Series B Junior Participating Preferred Stock,
par value $1.00 per share, as Exhibit A, the form
of Right Certificate as Exhibit B and the Summary
of Rights to Purchase Preferred Shares as Exhibit
C (incorporated by reference to Exhibit 4.8 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
4.4 First Amendment to Rights Agreement by and between
the Company and NationsBank of Texas, N. A.
(formerly NCNB Texas National Bank) dated as of
June 18, 1992 (incorporated by reference to
Exhibit 3.4 to Registration Statement on Form
S-3 (File No. 33-55426)).
4.5 Senior Indenture dated as of July 15, 1993 by and
between the Company and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.1
to Current Report on Form 8-K dated August 4,
1993).
4.6 Senior Subordinated Indenture dated as of July 15,
1993 by and between the Company and The Bank of
New York, as Trustee (incorporated by reference to
Exhibit 4.2 to Current Report on Form 8-K dated
August 4, 1993).
4.7 Specimen of 7 7/8% Senior Note due 2003 and
resolutions adopted by the Chairman of the Board
of Directors (incorporated by reference to Exhibit
4.3 to Current Report on Form 8-K dated August 4,
1993).
4.8 Specimen of 8 5/8% Senior Subordinated Note due
2005 and resolutions adopted by the Chairman of
the Board of Directors (incorporated by reference
to Exhibit 4.4 to Current Report on Form 8-K dated
August 4, 1993).
4.9 Note Agreement dated May 14, 1992 by and among
Alaska Pipeline Company and each of the purchasers
thereto (including forms of notes and other
exhibits thereto) and Inducement Agreement of even
date therewith by and among Seagull and Aid
Association for Lutherans, The Equitable Life
Assurance Society of the United States, Equitable
Variable Life Insurance Company, Provident Life &
Accident Insurance Company and Teachers Insurance
& Annuity Association of America (including
exhibits thereto) (incorporated by reference to
Exhibit 4.7 to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992).
4.10 Credit Agreement, U. S. $175 Million Reducing
Revolving Credit Facility, dated December 30, 1993
by and among Seagull Energy Canada Ltd., each of
the banks signatory thereto, and Chemical Bank of
Canada, The Bank of Nova Scotia and Canadian
Imperial Bank of Commerce, as co-agents (without
exhibits) (incorporated by reference to Exhibit
2.4 to Current Report on Form 8-K filed January
19, 1994).
4.11 Intercreditor Agreement executed in connection
with the Credit Agreement included as Exhibit 4.10
hereto (incorporated by reference to Exhibit 2.7
to Current Report on Form 8-K filed January 19,
1994).
26
<PAGE> 29
4.12 First Amendment to Intercreditor Agreement
executed in connection with the First Amendment to
Credit Agreement included as Exhibit 4.15 hereto
(incorporated by reference to Exhibit 4.8 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.13 Form of Bankers' Acceptance executed in connection
with the Credit Agreement included as Exhibit 4.10
hereto (incorporated by reference to Exhibit 2.8
to Current Report on Form 8-K filed January 19,
1994).
4.14 Guarantee executed in connection with the Credit
Agreement included as Exhibit 4.11 hereto
(incorporated by reference to Exhibit 2.9 to
Current Report on Form 8-K filed January 19,
1994).
4.15 First Amendment to Credit Agreement, U. S. $175
million Reducing Revolving Credit Facility by and
among Seagull Energy Canada Ltd., each of the
banks signatory thereto, and Chemical Bank of
Canada, The Bank of Nova Scotia and Canadian
Imperial Bank of Commerce, as co-agents, dated May
24, 1994 (without exhibits) (incorporated by
reference to Exhibit 4.5 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994).
*4.16 Second Amendment to Credit Agreement, U. S. $175
million Reducing Revolving Credit Facility by and
among Seagull Energy Canada Ltd., each of the
banks signatory thereto, and Chemical Bank of
Canada, The Bank of Nova Scotia and Canadian
Imperial Bank of Commerce, as co-agents, dated
June 30, 1994.
*4.17 Third Amendment to Credit Agreement, U. S. $175
million Reducing Revolving Credit Facility by and
among Seagull Energy Canada Ltd., each of the
banks signatory thereto, and Chemical Bank of
Canada, The Bank of Nova Scotia and Canadian
Imperial Bank of Commerce, as co-agents, dated
March 10, 1995.
4.18 Form of Note (U. S. Dollars) executed in
connection with the First Amendment to Credit
Agreement included as Exhibit 4.15 hereto
(incorporated by reference to Exhibit 4.6 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.19 Form of Note (Canadian Dollars) executed in
connection with the First Amendment to Credit
Agreement included as Exhibit 4.15 hereto
(incorporated by reference to Exhibit 4.7 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.20 Credit Agreement, $725 million Reducing Revolving
Credit and Competitive Bid Facility, dated May 24,
1994 by and among Seagull, each of the banks
signatory thereto and Texas Commerce Bank National
Association and Chemical Bank, as co-agents
(without exhibits and schedules) (incorporated by
reference to Exhibit 4.1 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994).
*4.21 First Amendment to Credit Agreement, $725 million
Reducing Revolving Credit and Competitive Bid
Facility, dated June 30, 1994 by and among
Seagull, each of the
27
<PAGE> 30
banks signatory thereto and Texas Commerce Bank
National Association and Chemical Bank, as
co-agents.
*4.22 Second Amendment to Credit Agreement, $725 million
Reducing Revolving Credit and Competitive Bid
Facility, dated March 10, 1995 by and among
Seagull, each of the banks signatory thereto and
Texas Commerce Bank National Association and
Chemical Bank, as co-agents.
4.23 Form of Committed Note executed in connection with
the Credit Agreement included as Exhibit 4.20
hereto (incorporated by reference to Exhibit 4.2
to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.24 Form of Competitive Note executed in connection
with the Credit Agreement included as Exhibit 4.20
hereto (incorporated by reference to Exhibit 4.3
to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.25 Form of Assignment and Acceptance executed in
connection with the Credit Agreement included as
Exhibit 4.20 hereto (incorporated by reference to
Exhibit 4.4 to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994).
# 10.1 Seagull Thrift Plan, as amended and restated (the
amended and restated plan is incorporated by
reference to Exhibit 10.46 to the Annual Report on
Form 10-K for the year ended December 31, 1990;
the First and Second Amendments thereto are
incorporated by reference to Exhibit 10.1 to
Annual Report on Form 10-K for the year ended
December 31, 1991; the Third Amendment thereto is
incorporated by reference to Exhibit 10.1 to
Annual Report on Form 10-K for the year ended
December 31, 1992).
# 10.2 Employment Agreement dated December 30, 1983 by
and between the Company and Barry J. Galt,
Chairman of the Board, President and Chief
Executive Officer of the Company (incorporated by
reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993).
# 10.3 Outside Directors Deferred Fee Plan of the
Company, as amended and restated (incorporated by
reference to Exhibit 10.3 to Annual Report on Form
10-K for the year ended December 31, 1991).
# 10.4 Seagull Energy Corporation Executive Supplemental
Retirement Plan, as amended (incorporated by
reference to Exhibit 10.4 to Annual Report on Form
10-K for the year ended December 31, 1991).
# 10.5 Executive Supplemental Retirement Plan Membership
Agreement between the Company and Barry J. Galt
dated as of February 3, 1986, as amended
(incorporated by reference to Exhibit 10.5 to
Annual Report on Form 10-K for the year ended
December 31, 1991).
#*10.6 ENSTAR Natural Gas Company Thrift Investment Plan,
as amended and restated (the amended and restated
plan is incorporated by reference to Exhibit 10.6
to Annual
28
<PAGE> 31
Report on Form 10-K for the year ended December
31, 1992; the First and Second Amendments are
incorporated by reference to Exhibit 10.6 to the
Annual Report on Form 10-K for the year ended
December 31, 1993; the Third Amendment thereto is
filed herewith).
#*10.7 ENSTAR Natural Gas Company Retirement Plan for
Salaried Employees, as renamed, amended and
restated (incorporated by reference to Exhibit
10.7 to Annual Report on Form 10-K for the year
ended December 31, 1992; the First Amendment
thereto is filed herewith).
#*10.8 ENSTAR Natural Gas Company Retirement Plan for
Operating Unit Employees, as amended and restated
(incorporated by reference to Exhibit 10.8 to
Annual Report on Form 10-K for the year ended
December 31, 1992; the First Amendment thereto is
filed herewith).
#*10.9 ENSTAR Natural Gas Company Profit by Service Plan
for Salaried Employees, as amended and restated
(the amended and restated plan is incorporated by
reference to Exhibit 10.9 to Annual Report on Form
10-K for the year ended December 31, 1992; the
First Amendment thereto is incorporated by
reference to Exhibit 10.9 to Annual Report on Form
10-K for the year ended December 31, 1993; the
Second Amendment thereto is filed herewith).
#*10.10 ENSTAR Natural Gas Company Profit by Service Plan
for Classified Employees, as amended and restated
(the amended and restated plan is incorporated by
reference to Exhibit 10.10 to Annual Report on
Form 10-K for the year ended December 31, 1992;
the First and Second Amendments thereto are
incorporated by reference to Exhibit 10.10 to
Annual Report on Form 10-K for the year ended
December 31, 1993; the Third Amendment thereto is
filed herewith).
# 10.11 Seagull Energy Corporation Supplemental Benefit
Plan, as amended (the original plan is
incorporated by reference to Exhibit 10.11 to
Annual Report on Form 10-K for the year ended
December 31, 1990; the First Amendment thereto is
incorporated by reference to Exhibit 10.9 to
Annual Report on Form 10-K for the year ended
December 31, 1991).
10.12 Gas Purchase Agreement among Alaska Pipeline
Company and Marathon Oil Company dated as of May
1, 1988, as amended (incorporated by reference to
Exhibit 10.2 to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993).
10.13 Agreement to terminate Gas Purchase Contract among
Alaska Pipeline Company and Union Oil Company of
California (incorporated by reference to Exhibit
10.3 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
# 10.14 Seagull Energy Corporation 1981 Stock Option Plan
(Restated), including forms of agreements, as
amended (incorporated by reference to Exhibit 10.6
to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
29
<PAGE> 32
# 10.15 Seagull Energy Corporation 1983 Stock Option Plan
(Restated), including forms of agreements, as
amended (the amended and restated plan is
incorporated by reference to Exhibit 10.7 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993; the amended form of
Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.15 to
Annual Report on Form 10-K for the year ended
December 31, 1993).
# 10.16 Seagull Energy Corporation 1986 Stock Option Plan
(Restated), including forms of agreements, as
amended (the amended and restated plan is
incorporated by reference to Exhibit 10.8 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993; the amended form of
Nonstatutory Stock Option Agreement is filed
incorporated by reference to Exhibit 10.16 to
Annual Report on Form 10-K for the year ended
December 31, 1993).
# 10.17 Seagull Employee Stock Ownership Plan (the "Plan")
as amended, including the First through Fourth
Amendments thereto (incorporated by reference to
Exhibit 10.9 to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993).
10.18 Non-Recourse Promissory Note from the Plan to the
Company, dated November 15, 1989 (incorporated by
reference to Exhibit 10.10 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993).
10.19 Security (Pledge) Agreement dated November 15,
1989 by and between the Plan and the Company
(incorporated by reference to Exhibit 10.11 to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
10.20 Sale Agreement made and entered into as of
November 19, 1993 between Novacor Petrochemicals
Ltd. and Seagull Energy Corporation (including
Appendix J, "Tax Provisions") (incorporated by
reference to Exhibit 2.1 to Current Report on Form
8-K filed January 19, 1994).
10.21 Guarantee executed in connection with Sale
Agreement included as Exhibit 10.20 hereto
(incorporated by reference to Exhibit 2.2 to
Current Report on Form 8-K filed January 19,
1994).
# 10.22 Seagull Energy Corporation 1990 Stock Option Plan,
including forms of agreements (the Plan is
incorporated by reference to Exhibit 10.42 to
Annual Report on Form 10-K for the year ended
December 31, 1990; the amended form of
Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.23 to
Annual Report on Form 10-K for the year ended
December 31, 1993).
10.23 Gas Purchase Contract among Alaska Pipeline
Company and Shell Oil Company dated as of December
20, 1982, as amended (incorporated by reference to
Exhibit 10.29 to Annual Report on Form 10-K for
the year ended December 31, 1991).
# 10.24 Seagull Energy Corporation 1992 Executive
Incentive Plan (incorporated by reference to
Exhibit 10.32 to Annual Report on Form 10-K for
the year ended December 31, 1991).
30
<PAGE> 33
# 10.25 Seagull Energy Corporation 1993 Executive
Incentive Plan (incorporated by reference to
Exhibit 10.35 to Annual Report on Form 10-K for
the year ended December 31, 1992).
# 10.26 Seagull Energy Corporation 1994 Executive
Incentive Plan (incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994).
10.27 Stock Purchase Agreement made and entered into as
of November 16, 1992 between Arkla, Inc. and
Seagull (not including disclosure schedules)
(incorporated by reference to Exhibit 2.1 to
Current Report on Form 8-K dated December 4, 1992,
as amended).
# 10.28 Seagull Energy Corporation 1993 Nonemployee
Directors' Stock Option Plan, including forms of
agreements (the Plan is incorporated by reference
to Exhibit 10.37 to Annual Report on Form 10-K for
the year ended December 31, 1992; the amended
form of Nonstatutory Stock Option Agreement
is incorporated by reference to Exhibit 10.29 to
Annual Report on Form 10-K for the year ended
December 31, 1993).
# 10.29 Seagull Energy Corporation 1993 Stock Option Plan,
including forms of agreements (the Plan is
incorporated by reference to Exhibit 10.38 to
Annual Report on Form 10-K for the year ended
December 31, 1992; the amended form of
Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.30 to
Annual Report on Form 10-K for the year ended
December 31, 1993).
#*10.30 Seagull Energy Canada Ltd. Retirement Plan.
#*10.31 Seagull Energy Canada Ltd. Capital Accumulation
Plan.
#*10.32 Restricted Stock Agreement made and entered into
as of March 17, 1995 between Seagull Energy
Corporation and Barry J. Galt.
#*10.33 Form of Restricted Stock Agreement made and
entered into as of March 17, 1995 between Seagull
Energy Corporation and Richard F. Barnes (granted
2,000 shares of restricted Common Stock), John W.
Elias (granted 3,000 shares of restricted Common
Stock), Thomas P. McConn (granted 2,000 shares of
restricted Common Stock) and Robert W. Shower
(granted 3,000 shares of restricted Common Stock).
#*10.34 Form of Severance Agreement between Seagull Energy
Corporation and John W. Elias, Thomas P. McConn
and Robert W. Shower.
#*10.35 Seagull Energy Corporation Management Stability
Plan.
*21. Subsidiaries of Seagull Energy Corporation.
*23.1 Consent of KPMG Peat Marwick LLP.
31
<PAGE> 34
*23.2 Consent of Ryder Scott Company, independent
petrolelum engineers.
*23.3 Consent of DeGolyer and MacNaughton independent
petroleum engineers.
*24.4 Consent of Netherland, Sewell and Associates,
Inc., independent petroleum engineers.
*27.1 Financial Data Schedule.
*99.1 Portions of the Seagull Energy Corporation and
Subsidiaries Annual Report to Shareholders for the
year ended December 31, 1994 which are
incorporated by reference herein to this Annual
Report on Form 10-K of Seagull Energy Corporation
and Subsidiaries for the year ended December 31,
1994.
____________________________
* Filed herewith.
# Identifies management contracts and compensatory plans or
arrangements.
(B) REPORTS ON FORM 8-K
There were no Reports on Form 8-K filed during the three months ended
December 31, 1994.
32
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SEAGULL ENERGY CORPORATION
<TABLE>
<S> <C>
By: /s/ Barry J. Galt
----------------------------------------------------
Date: March 29, 1995 Barry J. Galt, Chairman of the Board,
------------------------------------------------- President and Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By: /s/ Barry J. Galt By: /s/ J. Evans Attwell
-------------------------------------------------- -------------------------------------------------
Barry J. Galt, Chairman of the Board, President and J. Evans, Attwell, Director
Chief Executive Officer and Director (Principal
Executive Officer) Date: March 29, 1995
-------------------------------------------------
Date: March 29, 1995 By: /s/ Peter J. Fluor
------------------------------------------------- -------------------------------------------------
Peter J. Fluor, Director
By: /s/ John W. Elias Date: March 29, 1995
-------------------------------------------------- -------------------------------------------------
John W. Elias, Executive Vice President, Chief
Operating Officer and Director
Date: March 29, 1995 By: /s/ William R. Grant
-------------------------------------------------- -------------------------------------------------
William R. Grant, Director
By: /s/ Robert W. Shower Date: March 29, 1995
-------------------------------------------------- -------------------------------------------------
Robert W. Shower, Executive Vice President
and Chief Financial Officer and Director By: /s/ Dean P. Guerin
(Principal Financial Officer) -------------------------------------------------
Dean P. Guerin, Director
Date: March 29, 1995 Date: March 29, 1995
-------------------------------------------------- -------------------------------------------------
By: /s/ Rodney W. Bridges By: /s/ Richard M. Morrow
-------------------------------------------------- -------------------------------------------------
Rodney W. Bridges, Vice President and Controller Richard M. Morrow, Director
(Principal Accounting Officer)
Date: March 29, 1995 Date: March 29, 1995
-------------------------------------------------- -------------------------------------------------
By: /s/ Dee S. Osborne
-------------------------------------------------
Dee S. Osborne, Director
Date: March 29, 1995
--------------------------------------------------
By: /s/ Sam F. Segnar
-------------------------------------------------
Sam F. Segnar, Director
Date: March 29, 1995
---------------------------------------------------
By: /s/ George M. Sullivan
---------------------------------------------------
George M. Sullivan, Director
Date: March 29, 1995
---------------------------------------------------
</TABLE>
<PAGE> 36
EXHIBIT INDEX
EXHIBITS:
<TABLE>
<CAPTION>
Page
<S> <C> <C>
3.1 Articles of Incorporation of the Company, as amended, including
Articles of Amendment filed May 12, 1988, May 21, 1991, and May 21,
1993 with the Secretary of State of the State of Texas, that certain
Statement of Relative Rights and Preferences related to the
designation and issuance of the Company's $2.25 Convertible
Exchangeable Preferred Stock, Series A, filed August 6, 1986 with
the Secretary of State of the State of Texas and that certain
Statement of Resolution Establishing Series of Shares of Series B
Junior Participating Preferred Stock of Seagull Energy Corporation
filed March 21, 1989 with the Secretary of State of the State of
Texas (incorporated by reference to Exhibit 3.1 to Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993).
3.2 Bylaws of the Company, as amended through January 30, 1990
(incorporated by reference to Exhibit 3.2 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993).
4.1 Note Agreement dated June 17, 1985 by and among APC and The
Travelers Insurance Company, The Travelers Life Insurance Company,
and the Equitable Life Assurance Society of the United States
(collectively, the "Insurance Companies") (including forms of notes
and other exhibits thereto) and Inducement Agreement of even date
therewith by and among Seagull and the Insurance Companies
(including exhibits thereto) (incorporated by reference to Exhibit
4.1 to Annual Report on Form 10-K for the year ended December 31,
1990).
4.2 Form of Consent and Agreement dated April 15, 1991 by and among APC
and the Insurance Companies (including exhibits thereto)
(incorporated by reference to Exhibit 4.2 to Annual Report on Form
10-K for the year ended December 31, 1992).
4.3 Rights Agreement dated as of March 17, 1989 between the Company and
NCNB Texas National Bank, as Rights Agent, which includes the form
of Statement of Resolution setting forth the terms of the Series B
Junior Participating Preferred Stock, par value $1.00 per share, as
Exhibit A, the form of Right Certificate as Exhibit B and the
Summary of Rights to Purchase Preferred Shares as Exhibit C
(incorporated by reference to Exhibit 4.8 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993).
<PAGE> 37
4.4 First Amendment to Rights Agreement by and between the Company and
NationsBank of Texas, N. A. (formerly NCNB Texas National Bank)
dated as of June 18, 1992 (incorporated by reference to Exhibit 3.4
to Registration Statement on Form S-3 (File No. 33-55426)).
4.5 Senior Indenture dated as of July 15, 1993 by and between the
Company and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to Current Report on Form 8-K dated August
4, 1993).
4.6 Senior Subordinated Indenture dated as of July 15, 1993 by and
between the Company and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to Current Report on Form
8-K dated August 4, 1993).
4.7 Specimen of 7 7/8% Senior Note due 2003 and resolutions adopted by
the Chairman of the Board of Directors (incorporated by reference to
Exhibit 4.3 to Current Report on Form 8-K dated August 4, 1993).
4.8 Specimen of 8 5/8% Senior Subordinated Note due 2005 and resolutions
adopted by the Chairman of the Board of Directors (incorporated by
reference to Exhibit 4.4 to Current Report on Form 8-K dated August
4, 1993).
4.9 Note Agreement dated May 14, 1992 by and among Alaska Pipeline
Company and each of the purchasers thereto (including forms of notes
and other exhibits thereto) and Inducement Agreement of even date
therewith by and among Seagull and Aid Association for Lutherans,
The Equitable Life Assurance Society of the United States, Equitable
Variable Life Insurance Company, Provident Life & Accident Insurance
Company and Teachers Insurance & Annuity Association of America
(including exhibits thereto) (incorporated by reference to Exhibit
4.7 to Quarterly Report on Form 10-Q for the quarter ended June 30,
1992).
4.10 Credit Agreement, U.S. $175 Million Reducing Revolving Credit
Facility, dated December 30, 1993 by and among Seagull Energy Canada
Ltd., each of the banks signatory thereto, and Chemical Bank of
Canada, The Bank of Nova Scotia and Canadian Imperial Bank of
Commerce, as co-agents (without exhibits) (incorporated by reference
to Exhibit 2.4 to Current Report on Form 8-K filed January 19,
1994).
4.11 Intercreditor Agreement executed in connection with the Credit
Agreement included as Exhibit 4.10 hereto (incorporated by
<PAGE> 38
reference to Exhibit 2.7 to Current Report on Form 8-K filed
January 19, 1994).
4.12 First Amendment to Intercreditor Agreement executed in connection
with the First Amendment to Credit Agreement included as Exhibit
4.15 hereto (incorporated by reference to Exhibit 4.8 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994).
4.13 Form of Bankers' Acceptance executed in connection with the Credit
Agreement included as Exhibit 4.10 hereto (incorporated by reference
to Exhibit 2.8 to Current Report on Form 8-K filed January 19,
1994).
4.14 Guarantee executed in connection with the Credit Agreement included
as Exhibit 4.11 hereto (incorporated by reference to Exhibit 2.9 to
Current Report on Form 8-K filed January 19, 1994).
4.15 First Amendment to Credit Agreement, U.S. $175 million Reducing
Revolving Credit Facility by and among Seagull Energy Canada Ltd.,
each of the banks signatory thereto, and Chemical Bank of Canada,
The Bank of Nova Scotia and Canadian Imperial Bank of Commerce, as
co-agents, dated May 24, 1994 (without exhibits) (incorporated by
reference to Exhibit 4.5 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994).
*4.16 Second Amendment to Credit Agreement, U. S. $175 million Reducing
Revolving Credit Facility by and among Seagull Energy Canada Ltd.,
each of the banks signatory thereto, and Chemical Bank of Canada,
The Bank of Nova Scotia and Canadian Imperial Bank of Commerce, as
co-agents, dated June 30, 1994.
*4.17 Third Amendment to Credit Agreement, U. S. $175 million Reducing
Revolving Credit Facility by and among Seagull Energy Canada Ltd.,
each of the banks signatory thereto, and Chemical Bank of Canada,
The Bank of Nova Scotia and Canadian Imperial Bank of Commerce, as
co-agents, dated March 10, 1995.
4.18 Form of Note (U.S. Dollars) executed in connection with the First
Amendment to Credit Agreement included as Exhibit 4.15 hereto
(incorporated by reference to Exhibit 4.6 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994).
4.19 Form of Note (Canadian Dollars) executed in connection with the
First Amendment to Credit Agreement included as Exhibit 4.15 hereto
(incorporated by reference to Exhibit 4.7 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994).
<PAGE> 39
4.20 Credit Agreement, $725 million Reducing Revolving Credit and
Competitive Bid Facility, dated May 24, 1994 by and among Seagull,
each of the banks signatory thereto and Texas Commerce Bank National
Association and Chemical Bank, as co-agents (without exhibits and
schedules) (incorporated by reference to Exhibit 4.1 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994).
*4.21 First Amendment to Credit Agreement, $725 million Reducing Revolving
Credit and Competitive Bid Facility, dated June 30, 1994 by and
among Seagull, each of the banks signatory thereto and Texas
Commerce Bank National Association and Chemical Bank, as co-agents.
*4.22 Second Amendment to Credit Agreement, $725 million Reducing
Revolving Credit and Competitive Bid Facility, dated March 10, 1995
by and among Seagull, each of the banks signatory thereto and Texas
Commerce Bank National Association and Chemical Bank, as co-agents.
4.23 Form of Committed Note executed in connection with the Credit
Agreement included as Exhibit 4.20 hereto (incorporated by reference
to Exhibit 4.2 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.24 Form of Competitive Note executed in connection with the Credit
Agreement included as Exhibit 4.20 hereto (incorporated by reference
to Exhibit 4.3 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994).
4.25 Form of Assignment and Acceptance executed in connection with the
Credit Agreement included as Exhibit 4.20 hereto (incorporated by
reference to Exhibit 4.4 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994).
#10.1 Seagull Thrift Plan, as amended and restated (the amended and
restated plan is incorporated by reference to Exhibit 10.46 to the
Annual Report on Form 10-K for the year ended December 31, 1990; the
First and Second Amendments thereto are incorporated by reference to
Exhibit 10.1 to Annual Report on Form 10-K for the year ended
December 31, 1991; the Third Amendment thereto is incorporated by
reference to Exhibit 10.1 to Annual Report on Form 10-K for the year
ended December 31, 1992).
#10.2 Employment Agreement dated December 30, 1983 by and between the
Company and Barry J. Galt, Chairman of the Board, President and
Chief Executive Officer of the Company (incorporated by
<PAGE> 40
reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
#10.3 Outside Directors Deferred Fee Plan of the Company, as amended and
restated (incorporated by reference to Exhibit 10.3 to Annual Report
on Form 10-K for the year ended December 31, 1991).
#10.4 Seagull Energy Corporation Executive Supplemental Retirement Plan,
as amended (incorporated by reference to Exhibit 10.4 to Annual
Report on Form 10-K for the year ended December 31, 1991).
#10.5 Executive Supplemental Retirement Plan Membership Agreement between
the Company and Barry J. Galt dated as of February 3, 1986, as
amended (incorporated by reference to Exhibit 10.5 to Annual Report
on Form 10-K for the year ended December 31, 1991).
#*10.6 ENSTAR Natural Gas Company Thrift Investment Plan, as amended and
restated (the amended and restated plan is incorporated by reference
to Exhibit 10.6 to Annual Report on Form 10-K for the year ended
December 31, 1992; the First and Second Amendments are incorporated
by reference to Exhibit 10.6 to the Annual Report on Form 10-K for
the year ended December 31, 1993; the Third Amendment thereto is
filed herewith).
#*10.7 ENSTAR Natural Gas Company Retirement Plan for Salaried Employees,
as renamed, amended and restated (incorporated by reference to
Exhibit 10.7 to Annual Report on Form 10-K for the year ended
December 31, 1992; the First Amendment thereto is filed herewith).
#*10.8 ENSTAR Natural Gas Company Retirement Plan for Operating Unit
Employees, as amended and restated (incorporated by reference to
Exhibit 10.8 to Annual Report on Form 10-K for the year ended
December 31, 1992; the First Amendment thereto is filed herewith).
#*10.9 ENSTAR Natural Gas Company Profit by Service Plan for Salaried
Employees, as amended and restated (the amended and restated plan is
incorporated by reference to Exhibit 10.9 to Annual Report on Form
10-K for the year ended December 31, 1992; the First Amendment
thereto is incorporated by reference to Exhibit 10.9 to Annual
Report on Form 10-K for the year ended December 31, 1993; the Second
Amendment thereto is filed herewith).
<PAGE> 41
#*10.10 ENSTAR Natural Gas Company Profit by Service Plan for Classified
Employees, as amended and restated (the amended and restated plan is
incorporated by reference to Exhibit 10.10 to Annual Report on Form
10-K for the year ended December 31, 1992; the First and Second
Amendments thereto are incorporated by reference to Exhibit 10.10 to
Annual Report on Form 10-K for the year ended December 31, 1993; the
Third Amendment thereto is filed herewith).
#10.11 Seagull Energy Corporation Supplemental Benefit Plan, as amended
(the original plan is incorporated by reference to Exhibit 10.11 to
Annual Report on Form 10-K for the year ended December 31, 1990; the
First Amendment thereto is incorporated by reference to Exhibit 10.9
to Annual Report on Form 10-K for the year ended December 31, 1991).
10.12 Gas Purchase Agreement among Alaska Pipeline Company and Marathon
Oil Company dated as of May 1, 1988, as amended (incorporated by
reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
10.13 Agreement to terminate Gas Purchase Contract among Alaska Pipeline
Company and Union Oil Company of California (incorporated by
reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
#10.14 Seagull Energy Corporation 1981 Stock Option Plan (Restated),
including forms of agreements, as amended (incorporated by reference
to Exhibit 10.6 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
#10.15 Seagull Energy Corporation 1983 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and restated
plan is incorporated by reference to Exhibit 10.7 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993; the amended
form of Nonstatutory Stock Option Agreement is incorporated by
reference to Exhibit 10.15 to Annual Report on Form 10-K for the
year ended December 31, 1993).
#10.16 Seagull Energy Corporation 1986 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and restated
plan is incorporated by reference to Exhibit 10.8 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993; the amended
form of Nonstatutory Stock Option Agreement is filed incorporated by
reference to Exhibit 10.16 to Annual Report on Form 10-K for the
year ended December 31, 1993).
<PAGE> 42
#10.17 Seagull Employee Stock Ownership Plan (the "Plan") as amended,
including the First through Fourth Amendments thereto (incorporated
by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993).
10.18 Non-Recourse Promissory Note from the Plan to the Company, dated
November 15, 1989 (incorporated by reference to Exhibit 10.10 to
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993).
10.19 Security (Pledge) Agreement dated November 15, 1989 by and between
the Plan and the Company (incorporated by reference to Exhibit 10.11
to Quarterly Report on Form 10-Q for the quarter ended June 30,
1993).
10.20 Sale Agreement made and entered into as of November 19, 1993 between
Novacor Petrochemicals Ltd. and Seagull Energy Corporation
(including Appendix J, "Tax Provisions") (incorporated by reference
to Exhibit 2.1 to Current Report on Form 8-K filed January 19,
1994).
10.21 Guarantee executed in connection with Sale Agreement included as
Exhibit 10.20 hereto (incorporated by reference to Exhibit 2.2 to
Current Report on Form 8-K filed January 19, 1994).
#10.22 Seagull Energy Corporation 1990 Stock Option Plan, including forms
of agreements (the Plan is incorporated by reference to Exhibit
10.42 to Annual Report on Form 10-K for the year ended December 31,
1990; the amended form of Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.23 to Annual Report on Form
10-K for the year ended December 31, 1993).
10.23 Gas Purchase Contract among Alaska Pipeline Company and Shell Oil
Company dated as of December 20, 1982, as amended (incorporated by
reference to Exhibit 10.29 to Annual Report on Form 10-K for the
year ended December 31, 1991).
#10.24 Seagull Energy Corporation 1992 Executive Incentive Plan
(incorporated by reference to Exhibit 10.32 to Annual Report on Form
10-K for the year ended December 31, 1991).
#10.25 Seagull Energy Corporation 1993 Executive Incentive Plan
(incorporated by reference to Exhibit 10.35 to Annual Report on Form
10-K for the year ended December 31, 1992).
<PAGE> 43
#10.26 Seagull Energy Corporation 1994 Executive Incentive Plan
(incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994).
10.27 Stock Purchase Agreement made and entered into as of November 16,
1992 between Arkla, Inc. and Seagull (not including disclosure
schedules) (incorporated by reference to Exhibit 2.1 to Current
Report on Form 8-K dated December 4, 1992, as amended).
#10.28 Seagull Energy Corporation 1993 Nonemployee Directors' Stock Option
Plan, including forms of agreements (the Plan is incorporated by
reference to Exhibit 10.37 to Annual Report on Form 10-K for the
year ended December 31, 1992; the amended form of Nonstatutory
Stock Option Agreement is incorporated by reference to Exhibit
10.29 to Annual Report on Form 10-K for the year ended December 31,
1993).
#10.29 Seagull Energy Corporation 1993 Stock Option Plan, including forms
of agreements (the Plan is incorporated by reference to Exhibit
10.38 to Annual Report on Form 10-K for the year ended December 31,
1992; the amended form of Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.30 to Annual Report on Form
10-K for the year ended December 31, 1993).
#*10.30 Seagull Energy Canada Ltd. Retirement Plan.
#*10.31 Seagull Energy Canada Ltd. Capital Accumulation Plan.
#*10.32 Restricted Stock Agreement made and entered into as of March 17,
1995 between Seagull Energy Corporation and Barry J. Galt.
#*10.33 Form of Restricted Stock Agreement made and entered into as of March
17, 1995 between Seagull Energy Corporation and Richard F. Barnes
(granted 2,000 shares of restricted Common Stock), John W. Elias
(granted 3,000 shares of restricted Common Stock), Thomas P.
McConn (granted 2,000 shares of restricted Common Stock) and Robert
W. Shower (granted 3,000 shares of restricted Common Stock).
#*10.34 Form of Severance Agreement between Seagull Energy Corporation and
John W. Elias, Thomas P. McConn and Robert W. Shower.
#*10.35 Seagull Energy Corporation Management Stability Plan.
*21. Subsidiaries of Seagull Energy Corporation.
<PAGE> 44
*23.1 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Ryder Scott Company, independent petroleum engineers.
*23.3 Consent of DeGolyer and MacNaughton, independent petroleum engineers.
*23.4 Consent of Netherland, Sewell and Associates, Inc., independent
petroleum engineers.
*27.1 Financial Data Schedule.
*99.1 Portions of the Seagull Energy Corporation and Subsidiaries Annual
Report to Shareholders for the year ended December 31, 1994 which
are incorporated by reference herein to this Annual Report on Form
10-K of Seagull Energy Corporation and Subsidiaries for the year
ended December 31, 1994.
____________________
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
</TABLE>
<PAGE> 1
Exhibit 4.16
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment")
effective as of June 30, 1994 (the "Second Amendment Effective
Date") is made and entered into by and among SEAGULL ENERGY CANADA LTD. (the
"Borrower"), a corporation duly organized and validly existing under the
laws of the Province of Alberta, Canada, the banking institutions from time to
time a party to the Credit Agreement (as hereinafter defined) as amended by this
Second Amendment (each, together with its successors and assigns, a
"Bank" and collectively, the "Banks"), CHEMICAL BANK OF CANADA,
as arranger and as administrative agent for the Banks (in such capacity, the
"Administrative Agent"), THE BANK OF NOVA SCOTIA, as paying agent and
co-agent for the Banks (in such capacity, the "Paying Agent"), and
CANADIAN IMPERIAL BANK OF COMMERCE (in such capacity, the "Co-Agent"),
as co-agent for the Banks.
RECITALS
WHEREAS, the Borrower, the Administrative Agent, the Paying Agent, the
Co-Agent and the Banks are parties to a Credit Agreement dated as of December
30, 1993, as amended by the First Amendment to Credit Agreement dated as of May
24, 1994 (the "Credit Agreement"); and
WHEREAS, the Borrower, the Administrative Agent, the Paying Agent, the
Co-Agent and the Banks have agreed, on the terms and conditions herein set
forth, that the Credit Agreement be amended in certain respects;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions. Terms used herein which are defined in the
Credit Agreement shall have the same meanings when used herein unless otherwise
provided herein.
Section 2. Amendments to the Credit Agreement. On and after the Second
Amendment Effective Date, the Credit Agreement shall be amended as follows:
(a) Section 10.15 of the Credit Agreement is hereby amended by changing
the period (.) at the end of clause (iv) to a semi-colon (;) and by adding a new
clause, such clause to read in its entirety as follows:
provided, however, nothing in this Section
10.15 shall restrict the existence of negative covenants
otherwise prohibited by this Section in documentation
evidencing or related to Indebtedness permitted by Subsection
10.1(w) and, to the extent that the applicable Subsidiary does
not own any property included in the Borrowing Base,
Subsections 10.1(o), (p) and (u).
(b) Section 10.3(g) of the Credit Agreement is hereby amended in
its entirety as follows:
(g) intercompany loans, advances or investments by the
Parent to or in any Subsidiary of the Parent (other than a
Subsidiary that is obligated to pay Funded Indebtedness for
borrowed money payable solely by recourse to properties not
included
<PAGE> 2
in the Borrowing Base) or, to the extent permitted under Section
10.1(h) hereof, by any Subsidiary of the Parent to or in the Parent
or to or in any other Subsidiary of the Parent, provided, however,
that APC may not make any intercompany loans, advances or investments
in any Subsidiary of the Parent pursuant to this clause (g);
Section 3. Limitations. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) except as expressly set forth herein,
prejudice any right or rights which the Banks may now have or may have in the
future under or in connection with the Credit Agreement, the Loan Documents or
any of the other documents referred to therein. Except as expressly modified
hereby or by express written amendments thereof, the terms and provisions of the
Credit Agreement, the Notes, and any other Loan Documents or any other documents
or instruments executed in connection with any of the foregoing are and shall
remain in full force and effect. In the event of a conflict between this Second
Amendment and any of the foregoing documents, the terms of this Second Amendment
shall be controlling.
Section 4. Payment of Expenses. The Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Agents harmless from and against liability for the payment of all reasonable
substantiated out-of-pocket costs and expenses arising in connection with the
preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this Second Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for the Administrative Agent, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of any
modification of, the Credit Agreement and the other Loan Documents. The
provisions of this Section shall survive the termination of the Credit Agreement
and the repayment of the Loans.
Section 5. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER THAN THE CONFLICT OF
LAWS RULES) OF THE PROVINCE OF ALBERTA AND OF CANADA FROM TIME TO TIME IN
EFFECT.
Section 6. Descriptive Headings, etc. The descriptive headings of the
several Sections of this Second Amendment are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 7. Entire Agreement. This Second Amendment and the documents
referred to herein represent the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior and contemporaneous
oral and written agreements of the parties hereto with respect to the subject
matter hereof, including, without limitation, any commitment letters regarding
the transactions contemplated by this Second Amendment.
Section 8. Counterparts. This Second Amendment may be executed in any
number of counterparts and by different parties on separate counterparts and all
of such counterparts shall together constitute one and the same instrument.
Section 9. Amended Definitions. As used in the Credit agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent
2
<PAGE> 3
to the Second Amendment Effective Date the term "Agreement" shall mean the
Credit Agreement as amended by this Second Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective duly authorized
offices as of July , 1994, and effective as of the date first above written.
SEAGULL ENERGY CORPORATION,
a Texas corporation
By:
--------------------------------------
Robert M. King,
Vice President, Corporate
Development and Treasurer
3
<PAGE> 4
CHEMICAL BANK OF CANADA
individually and as Arranger
and as Administrative Agent
By:
----------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA, as Paying Agent, as
Co-Agent and as a Bank
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE, as
Co-Agent and as a Bank
By:
----------------------------------------
Name:
Title:
4
<PAGE> 5
ABN AMRO BANK CANADA
By:
-----------------------
Name:
Title:
By:
-----------------------
Name:
Title:
PARIBAS BANK OF CANADA
By:
-----------------------
Name:
Title:
By:
-----------------------
Name:
Title:
MELLON BANK CANADA
By:
-----------------------
Name:
Title:
5
<PAGE> 6
NBD BANK, CANADA
By:
-----------------------
Name:
Title:
SOCIETE GENERALE (CANADA)
By:
-----------------------
Name:
Title:
THE BANK OF TOKYO CANADA
By:
-----------------------
Name:
Title:
CREDIT LYONNAIS CANADA
By:
-----------------------
Name:
Title:
6
<PAGE> 7
The undersigned hereby joins in the execution of this Second Amendment
to evidence its consent hereto and its acknowledgment that the Guarantee shall
continue to apply to the Credit Agreement, as amended hereby.
SEAGULL ENERGY CORPORATION
By:
------------------------------------
Robert M. King,
Vice President, Corporate
Development and Treasurer
7
<PAGE> 1
EXHIBIT 4.17
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT ("Third Amendment") effective
as of March 10, 1995 (the "Third Amendment Effective Date") is made and entered
into by and among SEAGULL ENERGY CANADA LTD. (the "Borrower"), a corporation
duly organized and validly existing under the laws of the Province of Alberta,
Canada, the banking institutions from time to time a party to the Credit
Agreement (as hereinafter defined) as amended by this Third Amendment (each,
together with its successors and assigns, a "Bank" and collectively, the
"Banks"), CHEMICAL BANK OF CANADA, as arranger and as administrative agent for
the Banks (in such capacity, the "Administrative Agent"), THE BANK OF NOVA
SCOTIA, as paying agent and co-agent for the Banks (in such capacity, the
"Paying Agent"), and CANADIAN IMPERIAL BANK OF COMMERCE (in such capacity, the
"Co-Agent"), as co-agent for the Banks.
RECITALS
WHEREAS, the Borrower, the Administrative Agent, the Paying Agent, the
Co-Agent and the Banks are parties to a Credit Agreement dated as of December
30, 1993, as amended by the First Amendment to Credit Agreement dated as of May
24, 1994 and the Second Amendment to Credit Agreement dated as of June 30, 1994
(collectively, the "Credit Agreement"); and
WHEREAS, the Borrower, the Administrative Agent, the Paying Agent, the
Co-Agent and the Banks have agreed, on the terms and conditions herein set
forth, that the Credit Agreement be amended in certain respects;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions. Terms used herein which are defined in
the Credit Agreement shall have the same meanings when used herein unless
otherwise provided herein.
Section 2. Amendments to the Credit Agreement. On and after the
Third Amendment Effective Date, the Credit Agreement shall be amended as
follows:
(a) The definition of "EBITDA" set forth in Section 1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"EBITDA" shall mean net earnings (excluding gains and losses
on sales and retirement of assets, non-cash write downs, charges
resulting from accounting convention changes and deductions for dry
hole expenses) before deduction for federal, provincial, municipal and
state taxes, interest expense (including capitalized interest),
operating lease rentals or depreciation, depletion and amortization
expense, all determined in accordance with GAAP.
(b) The definition of "EBITDA/Interest Ratio" set forth in Section
1 of the Credit Agreement is hereby amended to read in its entirety as follows:
<PAGE> 2
"EBITDA/Interest Ratio" shall mean the ratio of (a) EBITDA of
the Parent and its Subsidiaries on a consolidated basis to (b)
operating lease rentals and interest expense (including capitalized
interest but excluding non-cash amortization of deferred financing
costs) on all Indebtedness of the Parent and its Subsidiaries on a
consolidated basis for any twelve-month period ending on the last day
of every calendar quarter during the period with respect to which the
EBITDA/Interest Ratio is to be calculated.
(c) Section 10.12 of the Credit Agreement is hereby amended in its
entirety as follows:
10.12 EBITDA/Interest Ratio. The Parent will not permit the
EBITDA/Interest Ratio to be, at any time, less than
(a) 2.50:1.00 for any twelve month period ending on the
last day of any calendar quarter prior to and including
September 30, 1995;
(b) 2.75:1.00 for any twelve month period ending on the
last day of any calendar quarter for the period from October
1, 1995 through and including March 31, 1996;
(c) 3.00:1.00 for any twelve month period ending on the
last day of any calendar quarter for the period from April 1,
1996 through and including March 31, 1997; and
(d) 3.50:1.00 for any twelve month period ending on the
last day of any calendar quarter thereafter.
Section 3. Limitations. The amendments set forth herein are
limited precisely as written and shall not be deemed to (a) be a consent to, or
waiver or modification of, any other term or condition of the Credit Agreement
or any of the other Loan Documents, or (b) except as expressly set forth
herein, prejudice any right or rights which the Banks may now have or may have
in the future under or in connection with the Credit Agreement, the Loan
Documents or any of the other documents referred to therein. Except as
expressly modified hereby or by express written amendments thereof, the terms
and provisions of the Credit Agreement, the Notes, and any other Loan Documents
or any other documents or instruments executed in connection with any of the
foregoing are and shall remain in full force and effect. In the event of a
conflict between this Third Amendment and any of the foregoing documents, the
terms of this Third Amendment shall be controlling.
Section 4. Payment of Expenses. The Borrower agrees, whether or
not the transactions hereby contemplated shall be consummated, to reimburse and
save the Agents harmless from and against liability for the payment of all
reasonable substantiated out-of-pocket costs and expenses arising in connection
with the preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this Third Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for the Administrative Agent, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of
any modification of, the Credit Agreement and the other Loan Documents. The
provisions of this Section shall survive the termination of the Credit
Agreement and the repayment of the Loans.
2
<PAGE> 3
Section 5. Governing Law. THIS THIRD AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER THAN
THE CONFLICT OF LAWS RULES) OF THE PROVINCE OF ALBERTA AND OF CANADA FROM TIME
TO TIME IN EFFECT.
Section 6. Descriptive Headings, etc. The descriptive headings
of the several Sections of this Third Amendment are inserted for convenience
only and shall not be deemed to affect the meaning or construction of any of
the provisions hereof.
Section 7. Entire Agreement. This Third Amendment and the
documents referred to herein represent the entire understanding of the parties
hereto regarding the subject matter hereof and supersede all prior and
contemporaneous oral and written agreements of the parties hereto with respect
to the subject matter hereof, including, without limitation, any commitment
letters regarding the transactions contemplated by this Third Amendment.
Section 8. Counterparts. This Third Amendment may be executed
in any number of counterparts and by different parties on separate counterparts
and all of such counterparts shall together constitute one and the same
instrument.
Section 9. Amended Definitions. As used in the Credit agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent to the Third Amendment
Effective Date the term "Agreement" shall mean the Credit Agreement as amended
by this Third Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be duly executed and delivered by their respective duly authorized
offices and effective as of the date first above written.
SEAGULL ENERGY CORPORATION,
a Texas corporation
By:______________________________
Robert M. King,
Vice President, Corporate
Development and Treasurer
3
<PAGE> 4
CHEMICAL BANK OF CANADA
individually and as Arranger
and as Administrative Agent
By:_____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as Paying Agent,
as Co-Agent and as a Bank
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Agent and as a Bank
By:_____________________________
Name:
Title:
4
<PAGE> 5
ABN AMRO BANK CANADA
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
PARIBAS BANK OF CANADA
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
MELLON BANK CANADA
By:_____________________________
Name:
Title:
5
<PAGE> 6
NBD BANK, CANADA
By:_____________________________
Name:
Title:
SOCIETE GENERALE (CANADA)
By:_____________________________
Name:
Title:
THE BANK OF TOKYO CANADA
By:_____________________________
Name:
Title:
CREDIT LYONNAIS CANADA
By:_____________________________
Name:
Title:
6
<PAGE> 7
The undersigned hereby joins in the execution of this Third Amendment
to evidence its consent hereto and its acknowledgment that the Guarantee shall
continue to apply to the Credit Agreement, as amended hereby.
SEAGULL ENERGY CORPORATION
By:_______________________________
Robert M. King,
Vice President, Corporate
Development and Treasurer
7
<PAGE> 1
Exhibit 4.21
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("First Amendment") effective
as of June 30, 1994 (the "First Amendment Effective Date") is made and entered
into by and among SEAGULL ENERGY CORPORATION (the "Borrower"), a Texas
corporation, the banking institutions from time to time a party to the Credit
Agreement (as hereinafter defined) as amended by this First Amendment (each,
together with its successors and assigns, a "Bank" and collectively, the
"Banks"), TEXAS COMMERCE BANK NATIONAL ASSOCIATION, individually and as
administrative agent for the Banks (in such capacity, the "Administrative
Agent") and CHEMICAL BANK, as auction agent.
RECITALS
WHEREAS, the Borrower, the Administrative Agent and the Banks are
parties to a Credit Agreement dated as of May 24, 1994 (the "Credit Agreement");
and
WHEREAS, the Borrower, the Administrative Agent and the Banks have
agreed, on the terms and conditions herein set forth, that the Credit Agreement
be amended in certain respects;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions. Terms used herein which are defined in the
Credit Agreement shall have the same meanings when used herein unless otherwise
provided herein.
Section 2. Amendments to the Credit Agreement. On and after the First
Amendment Effective Date, the Credit Agreement shall be amended as follows:
(a) Section 10.15 of the Credit Agreement is hereby amended by changing
the period (.) at the end of clause (iv) to a semi-colon (;) and by adding a new
clause, such clause to read in its entirety as follows:
provided, however, nothing in this Section
10.15 shall restrict the existence of negative covenants
otherwise prohibited by this Section in documentation
evidencing or related to Indebtedness permitted by Subsection
10.1(t) and, to the extent that the applicable Subsidiary does
not own any property included in the Borrowing Base,
Subsections 10.1(m), (n) and (s).
(b) Section 10.3(g) of the Credit Agreement is hereby amended in
its entirety as follows:
(g) intercompany loans, advances or investments by the
Company to or in any Subsidiary of the Company (other than a
Subsidiary that is obligated to pay Funded Indebtedness for
borrowed money payable solely by recourse to properties not
included in the Borrowing Base) or, to the extent permitted
under Section 10.1(h) hereof, by any Subsidiary of the
Company to or in the Company or to or in any other Subsidiary
of the Company, provided, however, that APC may
not make any intercompany loans, advances or investments in any
Subsidiary of the Company pursuant to this clause (g);
<PAGE> 2
Section 3. Limitations. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) except as expressly set forth herein,
prejudice any right or rights which the Banks may now have or may have in the
future under or in connection with the Credit Agreement, the Loan Documents or
any of the other documents referred to therein. Except as expressly modified
hereby or by express written amendments thereof, the terms and provisions of the
Credit Agreement, the Notes, and any other Loan Documents or any other documents
or instruments executed in connection with any of the foregoing are and shall
remain in full force and effect. In the event of a conflict between this First
Amendment and any of the foregoing documents, the terms of this First Amendment
shall be controlling.
Section 4. Payment of Expenses. The Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Administrative Agent harmless from and against liability for the payment of all
reasonable substantiated out-of-pocket costs and expenses arising in connection
with the preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this First Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for the Administrative Agent, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of any
modification of, the Credit Agreement and the other Loan Documents. The
provisions of this Section shall survive the termination of the Credit Agreement
and the repayment of the Loans.
Section 5. Governing Law. This First Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America.
Section 6. Descriptive Headings, etc. The descriptive headings of the
several Sections of this First Amendment are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 7. Entire Agreement. This First Amendment and the documents
referred to herein represent the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior and contemporaneous
oral and written agreements of the parties hereto with respect to the subject
matter hereof, including, without limitation, any commitment letters regarding
the transactions contemplated by this First Amendment.
Section 8. Counterparts. This First Amendment may be executed in any
number of counterparts and by different parties on separate counterparts and all
of such counterparts shall together constitute one and the same instrument.
Section 9. Amended Definitions. As used in the Credit agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent to the First Amendment
Effective Date the term "Agreement" shall mean the Credit Agreement as amended
by this First Amendment.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed and delivered by their respective duly authorized offices as
of July , 1994, and effective as of the date first above written.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE Section 26.02
THIS FIRST AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES.
SEAGULL ENERGY CORPORATION,
a Texas corporation
By:
------------------------------------
Robert M. King,
Vice President, Corporate
Development and Treasurer
3
<PAGE> 4
CHEMICAL BANK,
as Auction Agent
By:
---------------------------------
Name:
Title:
Address for Notices:
140 East 45th
29th Floor
New York, New York 10017
Attention: Ms. Terri Reilly
4
<PAGE> 5
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
as Administrative Agent and as a Bank
By:
--------------------------------------
Name:
Title:
Address for Notices:
712 Main Street
Houston, Texas 77002
Attention: Manager, Energy Division
5
<PAGE> 6
THE CHASE MANHATTAN BANK, N.A.
By:
-----------------------------------------
Name:
Title:
Address for Notices:
1221 McKinney, Suite 3000
Houston, Texas 77010
Attention: Scott Porter
Vice President
6
<PAGE> 7
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
------------------------------------
Name:
Title:
Address for Notices:
60 Wall Street
New York, New York, 10260-0060
Attention: Loan Department
7
<PAGE> 8
NATIONSBANK OF TEXAS, N.A.
By:
--------------------------------------
Name:
Title:
Address for Notices:
700 Louisiana Street
Houston, Texas 77002
Attention: Jo A. Tamalis
Senior Vice President
8
<PAGE> 9
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
Name:
Title:
Address for Notices:
100 Federal Street
Energy & Utilities 01-15-04
Boston, Massachusetts 02110
Attention: George W. Passela
Managing Director
9
<PAGE> 10
ABN AMRO BANK N.V.,
HOUSTON AGENCY
By:
--------------------------------
Name:
Title:
By: --------------------------------
Name:
Title:
Address for Notices:
Three Riverway, Suite 1600
Houston, Texas 70056
Attention: Ms. Cheryl I. Lipshutz
10
<PAGE> 11
THE BANK OF NEW YORK
By:
---------------------------------
Name:
Title:
Address for Notices:
One Wall Street
New York, New York 10296
Attention: Mr. Andrew G. Mathews
Vice President
11
<PAGE> 12
BANQUE PARIBAS HOUSTON AGENCY
By:
--------------------------------------
Name:
Title:
By: --------------------------------------
Name:
Title:
Address for Notices:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Barton D. Schouest
Group Vice President
12
<PAGE> 13
CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------------------
Name:
Title:
Address for Notices:
c/o Credit Lyonnais Representative Office
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Mr. A. David Dodd
13
<PAGE> 14
THE FUJI BANK, LIMITED
HOUSTON AGENCY
By:
----------------------------------------
Name:
Title:
Address for Notices:
909 Fannin, Suite 2800
Houston, Texas 77010
Attention: Mr. Jacques Azagury
Assistant Vice President
14
<PAGE> 15
NBD BANK, N.A.
By:
-----------------------------------
Name:
Title:
Address for Notices:
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Mr. Douglas R. Liftman
Second Vice President
15
<PAGE> 16
SOCIETE GENERALE,
SOUTHWEST AGENCY
By:
----------------------------------
Name:
Title:
Address for Notices:
4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mr. Ralph Saheb
Vice President
With a copy to:
1111 Bagby, Suite 2020
Houston, Texas 77002
Attention: Mr. Richard Erbert
Vice President
16
<PAGE> 17
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By:
-----------------------------------
Name:
Title:
Address for Notices:
909 Fannin, Suite 1104
Two Houston Center
Houston, Texas 77010
Attention: Mr. John M. McIntyre
Vice President
17
<PAGE> 18
BANK OF SCOTLAND
By:
----------------------------------
Name:
Title:
Address for Notices:
380 Madison Avenue
New York, New York 10017
Attention: Mr. Joseph Fratus
18
<PAGE> 19
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
--------------------------------------
Name:
Title:
Address for Notices:
55 East Monroe Street
Chicago, Illinois 60603-5702
Attention: Mr. Joseph Kunze
Vice President
19
<PAGE> 20
CHRISTIANIA BANK OG KREDITKASSE
By:
----------------------------------------
Name:
Title:
By: ----------------------------------------
Name:
Title:
Address for Notices:
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: Mr. Jahn Roising
First Vice President
20
<PAGE> 21
DEN NORSKE BANK AS
By:
---------------------------------
Name:
Title:
By: ---------------------------------
Name:
Title:
Address for Notices:
333 Clay Street
Suite 4890
Houston, Texas 77002
Attention: Mr. Byron L. Cooley
First Vice President
21
<PAGE> 22
MIDLAND BANK PLC,
NEW YORK BRANCH
By:
---------------------------------
Name:
Title:
Address for Notices:
140 Broadway
New York, New York 10005
Attention: Mr. Gregory B. Jansen
Director
22
<PAGE> 23
FIRST INTERSTATE BANK OF
TEXAS, N.A.
By:
-----------------------------------
Name:
Title:
Address for Notices:
1000 Louisiana
3rd Floor/MS #156
Houston, Texas 77002
Attention: Ms. Collie Michaels
Vice President
23
<PAGE> 24
THE BANK OF NOVA SCOTIA
By:
---------------------------------
Name:
Title:
Address for Notices:
Suite 3000, 1100 Louisiana
Houston, Texas 77002
Attention: Mr. Mark Ammerman
With copies to:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: Ms. Lauren Bianchi
24
<PAGE> 25
CIBC INC.
By:
-------------------------------
Name:
Title:
Address for Notices:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Loan Operations
With a copy to:
Canadian Imperial Bank of Commerce
Two Houston Center
909 Fannin Street
Houston, Texas 77010
Attention: Mr. Brian Swinford
Vice President
25
<PAGE> 26
CITIBANK, N.A.
By:
------------------------------
Name:
Title:
Address for Notices:
1200 Smith Street
20th Floor
Houston, Texas 77002
Attention: Ms. Lydia Junek
26
<PAGE> 27
MELLON BANK
By:
------------------------------
Name:
Title:
Address for Notices:
Mellon Bank
One Mellon Bank Center
Room 151-4425
Pittsburgh, Pennsylvania 15258-0001
Attention: Mr. A. Gary Chace
Senior Vice President
Energy & Utilities
Group
With a copy to:
Mellon Financial Services
1100 Louisiana, 36th Floor
Houston, Texas 77002-5210
Attention: Mr. Richard Gould
27
<PAGE> 28
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: First Union Corporation of North
Carolina
By: ----------------------------------------
Name:
Title:
Address for Notices:
First Union Corporation of North Carolina
1001 Fannin, Suite 2255
Houston, Texas 77002
Attention: Mr. Jay M. Chernosky
Vice President
28
<PAGE> 29
BANK OF MONTREAL
By:
--------------------------------------
Name:
Title:
Address for Notices:
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Mr. Robert L. Roberts
Director, U.S. Corporate Banking
29
<PAGE> 1
EXHIBIT 4.22
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Second Amendment")
effective as of March 10, 1995 (the "Second Amendment Effective Date") is made
and entered into by and among SEAGULL ENERGY CORPORATION (the "Borrower"), a
Texas corporation, the banking institutions from time to time a party to the
Credit Agreement (as hereinafter defined) as amended by this Second Amendment
(each, together with its successors and assigns, a "Bank" and collectively, the
"Banks"), TEXAS COMMERCE BANK NATIONAL ASSOCIATION, individually and as
administrative agent for the Banks (in such capacity, the "Administrative
Agent") and CHEMICAL BANK, as auction agent.
RECITALS
WHEREAS, the Borrower, the Administrative Agent and the Banks are
parties to a Credit Agreement dated as of May 24, 1994 as amended by the First
Amendment to Credit Agreement dated as of June 30, 1994 (the "Credit
Agreement"); and
WHEREAS, the Borrower, the Administrative Agent and the Banks have
agreed, on the terms and conditions herein set forth, that the Credit Agreement
be amended in certain respects;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions. Terms used herein which are defined in
the Credit Agreement shall have the same meanings when used herein unless
otherwise provided herein.
Section 2. Amendments to the Credit Agreement. On and after the
Second Amendment Effective Date, the Credit Agreement shall be amended as
follows:
(a) The definition of "EBITDA" set forth in Section 1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"EBITDA" shall mean net earnings (excluding gains and losses
on sales and retirement of assets, non-cash write downs, charges
resulting from accounting convention changes and deductions for dry
hole expenses) before deduction for federal and state taxes, interest
expense (including capitalized interest), operating lease rentals or
depreciation, depletion and amortization expense, all determined in
accordance with GAAP.
(b) The definition of "EBITDA/Interest Ratio" set forth in Section
1 of the Credit Agreement is hereby amended to read in its entirety as follows:
"EBITDA/Interest Ratio" shall mean the ratio of (a) EBITDA of
the Company and its Subsidiaries on a consolidated basis to (b)
operating lease rentals and interest expense (including capitalized
interest but excluding non-cash amortization of deferred financing
costs) on all Indebtedness of the Company and its Subsidiaries on a
consolidated basis for any twelve-month period ending on the last day
of every calendar quarter during the period with respect to which the
EBITDA/Interest Ratio is to be calculated.
<PAGE> 2
(c) Section 10.12 of the Credit Agreement is hereby amended in
its entirety as follows:
10.12 EBITDA/Interest Ratio. The Company will not permit the
EBITDA/Interest Ratio to be, at any time, less than
(a) 2.50:1.00 for any twelve month period ending on the
last day of any calendar quarter prior to and including
September 30, 1995;
(b) 2.75:1.00 for any twelve month period ending on the
last day of any calendar quarter for the period from October
1, 1995 through and including March 31, 1996;
(c) 3.00:1.00 for any twelve month period ending on the
last day of any calendar quarter for the period from April 1,
1996 through and including March 31, 1997; and
(d) 3.50:1.00 for any twelve month period ending on the
last day of any calendar quarter thereafter.
Section 3. Limitations. The amendments set forth herein are
limited precisely as written and shall not be deemed to (a) be a consent to, or
waiver or modification of, any other term or condition of the Credit Agreement
or any of the other Loan Documents, or (b) except as expressly set forth
herein, prejudice any right or rights which the Banks may now have or may have
in the future under or in connection with the Credit Agreement, the Loan
Documents or any of the other documents referred to therein. Except as
expressly modified hereby or by express written amendments thereof, the terms
and provisions of the Credit Agreement, the Notes, and any other Loan Documents
or any other documents or instruments executed in connection with any of the
foregoing are and shall remain in full force and effect. In the event of a
conflict between this Second Amendment and any of the foregoing documents, the
terms of this Second Amendment shall be controlling.
Section 4. Payment of Expenses. The Borrower agrees, whether or
not the transactions hereby contemplated shall be consummated, to reimburse and
save the Administrative Agent harmless from and against liability for the
payment of all reasonable substantiated out-of-pocket costs and expenses
arising in connection with the preparation, execution, delivery, amendment,
modification, waiver and enforcement of, or the preservation of any rights
under this Second Amendment, including, without limitation, the reasonable fees
and expenses of any local or other counsel for the Administrative Agent, and
all stamp taxes (including interest and penalties, if any), recording taxes and
fees, filing taxes and fees, and other charges which may be payable in respect
of, or in respect of any modification of, the Credit Agreement and the other
Loan Documents. The provisions of this Section shall survive the termination
of the Credit Agreement and the repayment of the Loans.
Section 5. Governing Law. This Second Amendment and the rights
and obligations of the parties hereunder and under the Credit Agreement shall
be construed in accordance with and be governed by the laws of the State of
Texas and the United States of America.
2
<PAGE> 3
Section 6. Descriptive Headings, etc. The descriptive headings
of the several Sections of this Second Amendment are inserted for convenience
only and shall not be deemed to affect the meaning or construction of any of
the provisions hereof.
Section 7. Entire Agreement. This Second Amendment and the
documents referred to herein represent the entire understanding of the parties
hereto regarding the subject matter hereof and supersede all prior and
contemporaneous oral and written agreements of the parties hereto with respect
to the subject matter hereof, including, without limitation, any commitment
letters regarding the transactions contemplated by this Second Amendment.
Section 8. Counterparts. This Second Amendment may be executed
in any number of counterparts and by different parties on separate counterparts
and all of such counterparts shall together constitute one and the same
instrument.
Section 9. Amended Definitions. As used in the Credit Agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent to the Second Amendment
Effective Date the term "Agreement" shall mean the Credit Agreement as amended
by this Second Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective duly authorized
offices and effective as of the date first above written.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE Section 26.02
THIS SECOND AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES.
SEAGULL ENERGY CORPORATION,
a Texas corporation
By: ____________________________
Robert M. King,
Vice President, Corporate
Development and Treasurer
3
<PAGE> 4
CHEMICAL BANK,
as Auction Agent
By:____________________________
Name:
Title:
Address for Notices:
140 East 45th
29th Floor
New York, New York 10017
Attention: Ms. Terri Reilly
4
<PAGE> 5
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
as Administrative Agent and as a Bank
By:____________________________
Name:
Title:
Address for Notices:
712 Main Street
Houston, Texas 77002
Attention: Manager, Energy Division
5
<PAGE> 6
THE CHASE MANHATTAN BANK, N.A.
By:____________________________
Name:
Title:
Address for Notices:
1221 McKinney, Suite 3000
Houston, Texas 77010
Attention: Scott Porter
Vice President
6
<PAGE> 7
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:____________________________
Name:
Title:
Address for Notices:
60 Wall Street
New York, New York, 10260-0060
Attention: Loan Department
7
<PAGE> 8
NATIONSBANK OF TEXAS, N.A.
By:____________________________
Name:
Title:
Address for Notices:
700 Louisiana Street
Houston, Texas 77002
Attention: Jo A. Tamalis
Senior Vice President
8
<PAGE> 9
THE FIRST NATIONAL BANK OF BOSTON
By:____________________________
Name:
Title:
Address for Notices:
100 Federal Street
Energy & Utilities 01-15-04
Boston, Massachusetts 02110
Attention: George W. Passela
Managing Director
9
<PAGE> 10
ABN AMRO BANK N.V., HOUSTON AGENCY
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
Address for Notices:
Three Riverway, Suite 1600
Houston, Texas 70056
Attention: Ms. Cheryl I. Lipshutz
10
<PAGE> 11
THE BANK OF NEW YORK
By:____________________________
Name:
Title:
Address for Notices:
One Wall Street
New York, New York 10296
Attention: Mr. Andrew G. Mathews
Vice President
11
<PAGE> 12
BANQUE PARIBAS HOUSTON AGENCY
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
Address for Notices:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Barton D. Schouest
Group Vice President
12
<PAGE> 13
CREDIT LYONNAIS NEW YORK BRANCH
By:____________________________
Name:
Title:
Address for Notices:
c/o Credit Lyonnais Representative Office
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Mr. A. David Dodd
13
<PAGE> 14
THE FUJI BANK, LIMITED HOUSTON AGENCY
By:____________________________
Name:
Title:
Address for Notices:
909 Fannin, Suite 2800
Houston, Texas 77010
Attention: Mr. Jacques Azagury
Assistant Vice President
14
<PAGE> 15
NBD BANK, N.A.
By:____________________________
Name:
Title:
Address for Notices:
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Mr. Douglas R. Liftman
Second Vice President
15
<PAGE> 16
SOCIETE GENERALE, SOUTHWEST AGENCY
By:____________________________
Name:
Title:
Address for Notices:
4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mr. Ralph Saheb
Vice President
With a copy to:
1111 Bagby, Suite 2020
Houston, Texas 77002
Attention: Mr. Richard Erbert
Vice President
16
<PAGE> 17
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By:____________________________
Name:
Title:
Address for Notices:
909 Fannin, Suite 1104
Two Houston Center
Houston, Texas 77010
Attention: Mr. John M. McIntyre
Vice President
17
<PAGE> 18
BANK OF SCOTLAND
By:____________________________
Name:
Title:
Address for Notices:
380 Madison Avenue
New York, New York 10017
Attention: Mr. Joseph Fratus
18
<PAGE> 19
CAISSE NATIONALE DE CREDIT AGRICOLE
By:____________________________
Name:
Title:
Address for Notices:
55 East Monroe Street
Chicago, Illinois 60603-5702
Attention: Mr. Joseph Kunze
Vice President
19
<PAGE> 20
CHRISTIANIA BANK OG KREDITKASSE
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
Address for Notices:
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: Mr. Jahn Roising
First Vice President
20
<PAGE> 21
DEN NORSKE BANK AS
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
Address for Notices:
333 Clay Street
Suite 4890
Houston, Texas 77002
Attention: Mr. Byron L. Cooley
First Vice President
21
<PAGE> 22
MIDLAND BANK PLC, NEW YORK BRANCH
By:____________________________
Name:
Title:
Address for Notices:
140 Broadway
New York, New York 10005
Attention: Mr. Gregory B. Jansen
Director
22
<PAGE> 23
FIRST INTERSTATE BANK OF TEXAS, N.A.
By:____________________________
Name:
Title:
Address for Notices:
1000 Louisiana
3rd Floor/MS #156
Houston, Texas 77002
Attention: Ms. Collie Michaels
Vice President
23
<PAGE> 24
THE BANK OF NOVA SCOTIA
By:____________________________
Name:
Title:
Address for Notices:
Suite 3000, 1100 Louisiana
Houston, Texas 77002
Attention: Mr. Mark Ammerman
With copies to:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: Ms. Lauren Bianchi
24
<PAGE> 25
CIBC INC.
By:____________________________
Name:
Title:
Address for Notices:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Loan Operations
With a copy to:
Canadian Imperial Bank of Commerce
Two Houston Center
909 Fannin Street
Houston, Texas 77010
Attention: Mr. Brian Swinford
Vice President
25
<PAGE> 26
CITIBANK, N.A.
By:____________________________
Name:
Title:
Address for Notices:
1200 Smith Street
20th Floor
Houston, Texas 77002
Attention: Ms. Lydia Junek
26
<PAGE> 27
MELLON BANK
By:____________________________
Name:
Title:
Address for Notices:
Mellon Bank
One Mellon Bank Center
Room 151-4425
Pittsburgh, Pennsylvania 15258-0001
Attention: Mr. A. Gary Chace
Senior Vice President
Energy & Utilities Group
With a copy to:
Mellon Financial Services
1100 Louisiana, 36th Floor
Houston, Texas 77002-5210
Attention: Mr. Richard Gould
27
<PAGE> 28
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: First Union Corporation of
North Carolina
By:____________________________
Name:
Title:
Address for Notices:
First Union Corporation
of North Carolina
1001 Fannin, Suite 2255
Houston, Texas 77002
Attention: Mr. Jay M. Chernosky
Vice President
28
<PAGE> 29
BANK OF MONTREAL
By:____________________________
Name:
Title:
Address for Notices:
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Mr. Robert L. Roberts
Director, U.S. Corporate
Banking
29
<PAGE> 1
EXHIBIT 10.6
THIRD AMENDMENT TO
ENSTAR NATURAL GAS COMPANY
THRIFT INVESTMENT PLAN
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and maintains the ENSTAR NATURAL GAS COMPANY THRIFT INVESTMENT PLAN
(the "Plan"); and
WHEREAS, Section 13.1 of the Plan provides the Administrative
Committee appointed by the Chief Executive Officer of the Company to administer
the Plan (the "Committee") shall have the authority to amend the Plan to comply
with applicable statutory or regulatory requirements; and
WHEREAS, the Committee desires to amend the Plan for this purpose;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1993:
1. The following new Paragraphs (16A), (17A), (19A) and (19B)
shall be added to Section 1.1 of the Plan:
"(16A) DIRECT ROLLOVER: A payment by the Plan to an Eligible
Retirement Plan designated by a Distributee.
(17A) DISTRIBUTEE: Each (A) Member entitled to an Eligible
Rollover Distribution, (B) Member's surviving spouse
with respect to the interest of such surviving spouse
in an Eligible Rollover Distribution, and (C) former
spouse of a Member who is an alternate payee under a
qualified domestic relations order, as defined in
section 414(p) of the Code, with regard to the
interest of such former spouse in an Eligible
Rollover Distribution.
(19A) ELIGIBLE RETIREMENT PLAN: (A) With respect to a
Distributee other than a surviving spouse, an
individual retirement account described in section
408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity
plan described in section 403(a) of the Code, or a
qualified plan described in section 401(a) of the
Code, which under its provisions accepts such
Distributee's Eligible Rollover Distribution and (B)
with respect to a Distributee who is a surviving
spouse, an individual retirement account described in
section
<PAGE> 2
408(a) of the Code or an individual retirement annuity
described in section 408(b) of the Code.
(19B) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of
all or any portion of the Accounts of a Distributee
other than (A) a distribution that is one of a series
of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the
Distributee's designated beneficiary or for a
specified period of ten years or more, (B) a
distribution to the extent such distribution is
required under section 401(a)(9) of the Code, (C) the
portion of a distribution that is not includable in
gross income (determined without regard to the
exclusion for net unrealized appreciation with
respect to employer securities), (D) a loan treated
as a distribution under section 72(p) of the Code and
not excepted by section 72(p)(2), (E) a loan in
default that is a deemed distribution, (F) any
corrective distributions provided in Sections 3.8 and
4.4(b), and (G) any other distribution so designated
by the Internal Revenue Service in revenue rulings,
notices, and other guidance of general
applicability."
2. Paragraph 3.1(g) of the Plan shall be deleted and the
following shall be substituted therefor:
"(g) As soon as administratively feasible following each
payroll period, the Company shall contribute, as Cash or Deferred
Contributions with respect to each Member, an amount equal to the
amount of Compensation elected to be deferred, pursuant to Paragraphs
(a) and (b) above (as adjusted pursuant to Paragraph (f) above), by
such Member during such payroll period. Such contributions, as well
as the contributions pursuant to Sections 3.3 and 3.4, shall be made
without regard to current or accumulated profits of the Company.
Notwithstanding the foregoing, the Plan is intended to qualify as a
profit sharing plan for purposes of sections 401(a), 402, 412 and 417
of the Code."
3. The following new Paragraph 3.2(e) shall be added to Section
3.2 of the Plan:
"(e) As soon as administratively feasible following the
end of each payroll period, the Company shall contribute, as Member
Contributions with respect to each Member, an amount equal to the
amount of Compensation elected to be contributed, pursuant to
Paragraphs (a) and (b) above (as adjusted pursuant to Paragraph (d)
above), by such Member during such payroll period."
-2-
<PAGE> 3
4. Section 3.3 of the Plan shall be deleted and the following
shall be substituted therefor:
"3.3 COMPANY MATCHING CONTRIBUTIONS. As soon as
administratively feasible following the end of each payroll period,
the Company shall contribute on behalf of each Member, as Company
Matching Contributions, an amount which equals 50% of the Cash or
Deferred Contributions and/or Member Contributions which were made
pursuant to Sections 3.1 and 3.2 on behalf of and by such Member
during such payroll period and which were designated as Basic
Contributions by such Member."
5. Paragraphs (a), (b) and (c) of Section 4.2 of the Plan shall
be deleted and the following shall be substituted therefor:
"(a) Cash or Deferred Contributions made by the Company on
a Member's behalf pursuant to Section 3.1 shall be allocated to such
Member's Cash or Deferred Account as of the last day of each payroll
period; provided, however, that for purposes of Section 4.3 only, such
contributions shall be allocated to the Cash or Deferred Account of
such Member as soon as administratively feasible after such
contributions are received by the Trustee.
(b) Member Contributions made by a Member pursuant to
Section 3.2 shall be allocated to the Member Contribution Account of
such Member as of the last day of each payroll period; provided,
however, that for purposes of Section 4.3 only, such contributions
shall be allocated to the Member Contribution Account of such Member
as soon as administratively feasible after such contributions are
received by the Trustee.
(c) The Company Matching Contributions made on a Member's
behalf for a month pursuant to Section 3.3 shall be allocated to the
Company Contribution Account of the Member as of the last day of each
payroll period; provided, however, that for purposes of Section 4.3
only, such contributions shall be allocated to the Company
Contribution Account of such Member as soon as administratively
feasible after such contributions are received by the Trustee."
6. The last sentence of Section 7.1(b) of the Plan shall be
deleted and the following shall be substituted therefor:
"The Committee shall furnish information pertinent to his consent to
each Member no less than thirty days and no more than ninety days
before his Benefit Commencement Date, and the furnished information
shall include a general description of the material features of, and
an explanation of the relative values of, the alternative forms of
benefit available under the Plan and must inform the Member of his
right to defer his Benefit Commencement Date and of his Direct
Rollover right pursuant to Section 7.10 below, if
-3-
<PAGE> 4
applicable. If a distribution is one to which sections 401(a)(11) and
417 of the Code do not apply, such distribution may commence less than
thirty days after the notice required under section 1.411(a)-11(c) of
the Treasury regulations is given, provided that (i) the Committee
clearly informs the Member that the Member has a right to a period of
at least thirty days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option) and (ii) the Member,
after receiving the notice, affirmatively elects a distribution."
7. The third sentence of Section 7.3 of the Plan shall be deleted and
the following shall be substituted therefor:
"Benefits paid in a lump sum shall be paid (or transferred pursuant to
Section 7.10) in cash except that a Member (or his designated
beneficiary or legal representative in the case of a deceased Member)
may elect to have the portion of his Accounts invested in the Company
Stock Fund distributed (or transferred pursuant to Section 7.10) in
full shares of Company Stock to the extent of the Member's pro rata
portion of the shares of Company Stock held in such Fund with any
balance of the Member's interest in such Fund (including fractional
shares) to be paid or transferred in cash."
8. The following shall be added to the end of Section 7.5 of the
Plan:
"No less than thirty days and no more than ninety days before his
Benefit Commencement Date, the Committee shall inform the Member of
his Direct Rollover rights pursuant to Section 7.10 below. A
distribution or Direct Rollover of the Member's benefit may commence
less than thirty days after such notice is given, provided that (1)
the Committee clearly informs the Member that the Member has a right
to a period of at least thirty days after receiving the notice to
consider the decision of whether or not to elect a Direct Rollover
pursuant to Section 7.10 below, and (2) the Member, after receiving
the notice, affirmatively elects either a distribution or a Direct
Rollover or a combination thereof."
9. The following new Section 7.10 shall be added to Article VII of
the Plan:
"7.10 DIRECT ROLLOVER ELECTION.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Section, a Distributee may elect, at the time and in the manner
prescribed by the Committee, to have all or any portion of an Eligible
Rollover Distribution (other than any portion attributable to the
offset of an outstanding loan balance of such Member pursuant to the
Plan's loan procedure) paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover. The preceding
sentence notwithstanding, a Distributee may elect a Direct Rollover
pursuant to this Section only if such Distributee's Distributions
during the
-4-
<PAGE> 5
Plan Year are reasonably expected to total $200 or more. Furthermore,
if less than 100% of the Member's Eligible Rollover Distribution is to
be a Direct Rollover, the amount of the Direct Rollover must be $500
or more. Prior to any Direct Rollover pursuant to this Section, the
Distributee shall furnish the Committee with a statement from the
plan, account, or annuity to which the benefit is to be transferred
verifying that such plan, account, or annuity is, or is intended to
be, an Eligible Retirement Plan.
(b) No less than thirty days and no more than ninety days
before his Benefit Commencement Date, the Committee shall inform the
Distributee of his Direct Rollover right pursuant to this Section. A
distribution or Direct Rollover of the Distributee's benefit may
commence less than thirty days after such notice is given, provided
that (1) the Committee clearly informs the Distributee that the
Distributee has a right to a period of at least thirty days after
receiving the notice to consider the decision of whether or not to
elect a Direct Rollover and (2) the Distributee, after receiving the
notice, affirmatively elects either a distribution or a Direct
Rollover or a combination thereof."
10. The following sentence shall be added to the end Section 8.5(a)
of the Plan:
"Any withdrawal pursuant to this Article VIII shall be subject to the
Direct Rollover election described in Section 7.10."
II. Effective August 5, 1993, the following shall be added to the end of
Section 1.1(23) of the Plan:
"Hours of Service shall also include any hours required to be credited
by federal law other than the Act or the Code, but only under the
conditions and to the extent so required by such federal law."
III. Effective August 1, 1994, Section 7.5 of the Plan shall be deleted.
IV. Effective January 1, 1997, the last sentence of Section 1.1(15) of the
Plan shall be deleted and the following shall be substituted therefor:
"The above notwithstanding, the Compensation of any Member taken into
account for purposes of the Plan shall be limited to $150,000 for any
Plan Year with such amount to be (i) adjusted automatically to reflect
any amendments to section 401(a)(17) of the Code and any
cost-of-living increases authorized by section 401(a)(17) of the Code,
(ii) prorated for a Plan Year of less than twelve months and to the
extent otherwise required by applicable law, and (iii) in the case of
a Member who is either a five-percent owner of the Company (within the
meaning of section 416(i)(1)(A)(iii) of the Code) or is one of the ten
most Highly Compensated Employees for the Plan Year and who has a
spouse and/or lineal descendants who are under the age of
-5-
<PAGE> 6
nineteen as of the end of a Plan Year who receive Compensation during
such Plan Year, prorated and allocated among such Member, his spouse,
and/or lineal descendants under the age of nineteen based on the
Compensation for such Plan Year of each such individual."
V. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 1st day of September, 1994.
ADMINISTRATIVE COMMITTEE
ENSTAR NATURAL GAS COMPANY
THRIFT INVESTMENT PLAN
/s/ R. F. BARNES
By __________________________
-6-
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO
ENSTAR NATURAL GAS COMPANY
RETIREMENT PLAN
FOR SALARIED EMPLOYEES
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and maintains the ENSTAR NATURAL GAS COMPANY RETIREMENT PLAN FOR
SALARIED EMPLOYEES (the "Plan"); and
WHEREAS, Section 17.1 of the Plan provides the Administrative
Committee appointed by the Chief Executive Officer of the Company to administer
the Plan (the "Committee") shall have the authority to amend the Plan to comply
with applicable statutory or regulatory requirements; and
WHEREAS, the Committee desires to amend the Plan for this purpose;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1989:
1. Section 2.2(c) of the Plan shall be deleted and the following
shall be substituted therefor:
"(c) Except as otherwise provided in the Plan, the terms of
this restated Plan shall not affect the Accrued Benefit of Members who
are not credited with any Accrual Service on or after the Effective
Date or the Vested Interest of Members who do not complete an Hour of
Service on or after the Effective Date."
2. The term "permanent" shall be deleted wherever it appears in
Section 9.6 of the Plan and shall be replaced with the term "regular."
II. Effective January 1, 1993:
1. The following new Paragraphs (13A), (14A), (17A) and (17B)
shall be added to Section 1.1 of the Plan:
"(13A) DIRECT ROLLOVER: A payment by the Plan to an Eligible
Retirement Plan designated by a Distributee.
<PAGE> 2
(14A) DISTRIBUTEE: Each (A) Member entitled to an Eligible
Rollover Distribution, (B) Member's surviving spouse
with respect to the interest of such surviving spouse
in an Eligible Rollover Distribution, and (C) former
spouse of a Member who is an alternate payee under a
qualified domestic relations order, as defined in
section 414(p) of the Code, with regard to the
interest of such former spouse in an Eligible
Rollover Distribution.
(17A) ELIGIBLE RETIREMENT PLAN: (A) With respect to a
Distributee other than a surviving spouse, an
individual retirement account described in section
408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity
plan described in section 403(a) of the Code, or a
qualified plan described in section 401(a) of the
Code, which under its provisions accepts such
Distributee's Eligible Rollover Distribution and (B)
with respect to a Distributee who is a surviving
spouse, an individual retirement account described in
section 408(a) of the Code or an individual
retirement annuity described in section 408(b) of the
Code.
(17B) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of
all or any portion of the Accrued Benefit of a
Distributee other than (A) a distribution that is one
of a series of substantially equal periodic payments
(not less frequently than annually) made for the life
(or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee
and the Distributee's designated beneficiary or for a
specified period of ten years or more, (B) a
distribution to the extent such distribution is
required under section 401(a)(9) of the Code, (C) the
portion of a distribution that is not includable in
gross income (determined without regard to the
exclusion for net unrealized appreciation with
respect to employer securities), and (D) any other
distribution so designated by the Internal Revenue
Service in revenue rulings, notices, and other
guidance of general applicability."
2. The second sentence of Section 9.1(c) of the Plan shall be
deleted and the following shall be substituted therefor:
"The Committee shall furnish certain information pertinent to a
Member's consent under Paragraph (b)(1) to each Member within a
reasonable time (no less than thirty days and no more than ninety
days) before his Annuity Starting Date, and the furnished information
shall include a general description of the material features of,
-2-
<PAGE> 3
and an explanation of the relative values of, the alternative forms of
benefit available under the Plan and must inform the Member of his
right to defer his Annuity Starting Date and of his Direct Rollover
right pursuant to Section 9.11 below, if applicable."
3. The following new Section 9.11 shall be added to Article IX of
the Plan:
"9.11 DIRECT ROLLOVER ELECTION.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Section, a Distributee may elect, at the time and in the manner
prescribed by the Committee, to have all or any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover. The preceding
sentence notwithstanding, a Distributee may elect a Direct Rollover
pursuant to this Section only if such Distributee's Eligible Rollover
Distributions during the Plan Year are reasonably expected to total
$200 or more. Furthermore, if less than 100% of the Member's Eligible
Rollover Distribution is to be a Direct Rollover, the amount of the
Direct Rollover must be $500 or more. Prior to any Direct Rollover
pursuant to this Section, the Distributee shall furnish the Committee
with a statement from the plan, account, or annuity to which the
benefit is to be transferred verifying that such plan, account, or
annuity is, or is intended to be, an Eligible Retirement Plan.
(b) No less than thirty days and no more than ninety days
before his Annuity Starting Date, the Committee shall inform the
Distributee of his Direct Rollover right pursuant to this Section. A
distribution or Direct Rollover of the Distributee's benefit may
commence less than thirty days after such notice is given, provided
that (1) the Committee clearly informs the Distributee that the
Distributee has a right to a period of at least thirty days after
receiving the notice to consider the decision of whether or not to
elect a Direct Rollover and (2) the Distributee, after receiving the
notice, affirmatively elects either a distribution or a Direct
Rollover or a combination thereof."
III. Effective August 5, 1993:
1. The following shall be added to the end of Section 1.1(20) of
the Plan:
"Hours of Service shall also include any hours required to be credited
by federal law other than the Act or the Code, but only under the
conditions and to the extent so required by such federal law."
-3-
<PAGE> 4
2. The following shall be added to the end of Section 1.1(26) of
the Plan:
"A Period of Service shall also include any period required to be
credited as a Period of Service by federal law, other than the Act or
the Code, but only under the conditions and the extent so required by
such federal law."
IV. Effective January 1, 1994:
1. The last sentence of Section 1.1(12) of the Plan shall be
deleted and the following shall be substituted therefor:
"The above notwithstanding, the Compensation of any Member taking into
account for purposes of the Plan shall be limited to $150,000 for any
Plan Year with such limitation to be (i) adjusted automatically to
reflect any cost-of-living increases authorized by section 401(a)(17)
of the Code (with the adjustment for a calendar year being applicable
to any period, not exceeding twelve months, over which Average Monthly
Compensation is determined which begins in such calendar year), (ii)
prorated to the extent required by applicable law, and (iii) in the
case of a Member who is either a five-percent owner of the Company
(within the meaning of section 416(i)(1)(A)(iii) of the Code) or is
one of the ten highly compensated employees of the Company (within the
meaning of section 414(q) of the Code) paid the greatest Compensation
during the applicable year and who has a spouse and/or lineal
descendants who are under the age of nineteen as of the end of an
applicable year who receive Compensation during such applicable year,
prorated and allocated among such Member, his spouse, and/or lineal
descendants under the age of nineteen based on the Compensation for
such applicable year of each such individual. If, in determining a
Member's benefits accruing in a Plan Year commencing on or after
January 1, 1994, Compensation for any period preceding such Plan Year
is taken into account, the Compensation for such prior period shall be
subject to the Compensation limitation in the preceding sentence as in
effect for that prior period. For this purpose, for periods prior to
January 1, 1994, the annual limit on Compensation shall be $150,000."
2. The following new Paragraph (31A) shall be added to Section
1.1 of the Plan:
"(31A) SECTION 401(A)(17) MEMBER: A Member whose current Accrued
Benefit as of a date on or after January 1, 1994, is based on
Compensation for a year beginning prior to January 1, 1994,
that exceeded $150,000."
-4-
<PAGE> 5
3. The following new subsections (d) and (e) shall be added to
Section 2.2 of the Plan:
"(d) Notwithstanding any other provisions of the Plan,
each Section 401(a)(17) Member's Accrued Benefit under the Plan will
be the greater of the Accrued Benefit determined for such Member under
Paragraph (1) or Paragraph (2) below:
(1) Such Member's Accrued Benefit
determined under the benefit formula applicable for Plan Years
beginning on or after January 1, 1994, and applied to such
Member's total years of Accrual Service, or
(2) the sum of:
(A) Such Member's Accrued Benefit as of
December 31, 1993, frozen in accordance with Treasury
regulation section 1.401(a)(4)-13, and
(B) Such Member's Accrued Benefit
determined under the benefit formula applicable for
Plan Years beginning on or after January 1, 1994, and
applied to the years of Accrual Service credited to
such Member for Plan Years beginning on or after
January 1, 1994.
(e) In determining a Member's Accrued Benefit as of
December 31, 1993, for purposes of Paragraph (b) above, increases in
the annual Compensation limit pursuant to section 401(a)(17) of the
Code for 1990, 1991, 1992, and 1993 shall be applied in determining
the limits on Compensation for any prior year."
V. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 1st day of September, 1994.
ADMINISTRATIVE COMMITTEE
ENSTAR NATURAL GAS COMPANY
RETIREMENT PLAN
FOR SALARIED EMPLOYEES
/s/ R. F. BARNES
By __________________________
-5-
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDMENT TO
ENSTAR NATURAL GAS COMPANY
RETIREMENT PLAN
FOR OPERATING UNIT EMPLOYEES
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and maintains the ENSTAR NATURAL GAS COMPANY RETIREMENT PLAN FOR
OPERATING UNIT EMPLOYEES (the "Plan"); and
WHEREAS, Section 16.1 of the Plan provides the Administrative
Committee appointed by the Chief Executive Officer of the Company to administer
the Plan (the "Committee") shall have the authority to amend the Plan to comply
with applicable statutory or regulatory requirements; and
WHEREAS, the Committee desires to amend the Plan for this purpose;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1989, the term "permanent" shall be deleted
wherever it appears in Section 8.5 of the Plan and shall be replaced with the
term "regular."
II. Effective January 1, 1993:
1. The following new Paragraphs (11A), (12A), (15A) and (15B)
shall be added to Section 1.1 of the Plan:
"(11A) DIRECT ROLLOVER: A payment by the Plan to an Eligible
Retirement Plan designated by a Distributee.
(12A) DISTRIBUTEE: Each (A) Member entitled to an Eligible
Rollover Distribution, (B) Member's surviving spouse
with respect to the interest of such surviving spouse
in an Eligible Rollover Distribution, and (C) former
spouse of a Member who is an alternate payee under a
qualified domestic relations order, as defined in
section 414(p) of the Code, with regard to the
interest of such former spouse in an Eligible
Rollover Distribution.
(15A) ELIGIBLE RETIREMENT PLAN: (A) With respect to a
Distributee other than a surviving spouse, an
individual retire-
<PAGE> 2
ment account described in section 408(a) of the Code,
an individual retirement annuity described in section
408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified plan
described in section 401(a) of the Code, which under
its provisions accepts such Distributee's Eligible
Rollover Distribution and (B) with respect to a
Distributee who is a surviving spouse, an individual
retirement account described in section 408(a) of the
Code or an individual retirement annuity described
in section 408(b) of the Code.
(15B) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of
all or any portion of the Accrued Benefit of a
Distributee other than (A) a distribution that is one
of a series of substantially equal periodic payments
(not less frequently than annually) made for the life
(or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee
and the Distributee's designated beneficiary or for a
specified period of ten years or more, (B) a
distribution to the extent such distribution is
required under section 401(a)(9) of the Code, (C) the
portion of a distribution that is not includable in
gross income (determined without regard to the
exclusion for net unrealized appreciation with
respect to employer securities), and (D) any other
distribution so designated by the Internal Revenue
Service in revenue rulings, notices, and other
guidance of general applicability."
2. The second sentence of Section 8.1(c) of the Plan shall be
deleted and the following shall be substituted therefor:
"The Committee shall furnish certain information pertinent to a
Member's consent under Paragraph (b)(1) to each Member within a
reasonable time (no less than thirty days and no more than ninety
days) before his Annuity Starting Date, and the furnished information
shall include a general description of the material features of, and
an explanation of the relative values of, the alternative forms of
benefit available under the Plan and must inform the Member of his
right to defer his Annuity Starting Date and of his Direct Rollover
right pursuant to Section 8.10 below, if applicable."
3. The following new Section 8.10 shall be added to Article VIII
of the Plan:
"8.10 DIRECT ROLLOVER ELECTION.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Section, a Distributee
-2-
<PAGE> 3
may elect, at the time and in the manner prescribed by the Committee,
to have all or any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover. The preceding sentence notwithstanding, a
Distributee may elect a Direct Rollover pursuant to this Section only
if such Distributee's Eligible Rollover Distributions during the Plan
Year are reasonably expected to total $200 or more. Furthermore, if
less than 100% of the Member's Eligible Rollover Distribution is to be
a Direct Rollover, the amount of the Direct Rollover must be $500 or
more. Prior to any Direct Rollover pursuant to this Section, the
Distributee shall furnish the Committee with a statement from the
plan, account, or annuity to which the benefit is to be transferred
verifying that such plan, account, or annuity is, or is intended to
be, an Eligible Retirement Plan.
(b) No less than thirty days and no more than ninety days
before his Annuity Starting Date, the Committee shall inform the
Distributee of his Direct Rollover right pursuant to this Section. A
distribution or Direct Rollover of the Distributee's benefit, if
payable pursuant to Section 7.3 or Section 8.3, may commence less than
thirty days after such notice is given, provided that (1) the
Committee clearly informs the Distributee that the Distributee has a
right to a period of at least thirty days after receiving the notice
to consider the decision of whether or not to elect a Direct Rollover
and (2) the Distributee, after receiving the notice, affirmatively
elects either a distribution or a Direct Rollover or a combination
thereof."
III. Effective August 5, 1993, the following shall be added to the end of
Section 1.1(18) of the Plan:
"Hours of Service shall also include any hours required to be credited
by federal law other than the Act or the Code, but only under the
conditions and to the extent so required by such federal law."
IV. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 1st day of September, 1994.
ADMINISTRATIVE COMMITTEE
ENSTAR NATURAL GAS COMPANY
RETIREMENT PLAN
FOR OPERATING UNIT EMPLOYEES
By /s/ R.F. BARNES
__________________________
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<PAGE> 1
EXHIBIT 10.9
SECOND AMENDMENT TO
ENSTAR NATURAL GAS COMPANY
PROFIT BY SERVICE PLAN
FOR SALARIED EMPLOYEES
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and maintains the ENSTAR NATURAL GAS COMPANY PROFIT BY SERVICE PLAN FOR
SALARIED EMPLOYEES (the "Plan"); and
WHEREAS, Section 15.1 of the Plan provides the Administrative
Committee appointed by the Chief Executive Officer of the Company to administer
the Plan (the "Committee") shall have the authority to amend the Plan to comply
with applicable statutory or regulatory requirements; and
WHEREAS, the Committee desires to amend the Plan for this purpose;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1993:
1. The following new Paragraphs (8A), (9A), (11A) and (11B) shall
be added to Section 1.1 of the Plan:
"(8A) DIRECT ROLLOVER: A payment by the Plan to an Eligible
Retirement Plan designated by a Distributee.
(9A) DISTRIBUTEE: Each (A) Member entitled to an Eligible Rollover
Distribution, (B) Member's surviving spouse with respect to
the interest of such surviving spouse in an Eligible Rollover
Distribution, and (C) former spouse of a Member who is an
alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, with regard to the
interest of such former spouse in an Eligible Rollover
Distribution.
(11A) ELIGIBLE RETIREMENT PLAN: (A) With respect to a Distributee
other than a surviving spouse, an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified plan described in section 401(a) of the Code, which
under its provisions accepts such Distributee's Eligible
Rollover Distribution and (B) with respect to a Distributee
who is a surviving spouse, an individual retirement account
described in section
<PAGE> 2
408(a) of the Code or an individual retirement annuity
described in section 408(b) of the Code.
(11B) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of all or any
portion of the Accounts of a Distributee other than (A) a
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the
Distributee's designated beneficiary or for a specified period
of ten years or more, (B) a distribution to the extent such
distribution is required under section 401(a)(9) of the Code,
(C) the portion of a distribution that is not includable in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities), and (D) any other distribution so designated by
the Internal Revenue Service in revenue rulings, notices, and
other guidance of general applicability."
2. The last sentence of Section 9.1(b) of the Plan shall be
deleted and the following shall be substituted therefor:
"The Committee shall furnish information pertinent to his consent to
each Member no less than thirty days and no more than ninety days
before his Benefit Commencement Date, and the furnished information
shall include a general description of the material features of, and
an explanation of the relative values of, the alternative forms of
benefit available under the Plan and must inform the Member of his
right to defer his Benefit Commencement Date and of his Direct
Rollover right pursuant to Section 9.9 below, if applicable. If a
distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than thirty days
after the notice required under section 1.411(a)-(11)(c) of the
Treasury regulations is given, provided that (i) the Committee clearly
informs the Member that the Member has a right to a period of at least
thirty days after receiving the notice to consider the decision of
whether or not to select a distribution (and, if applicable, a
particular distribution option) and (ii) the Member, after receiving
the notice, affirmatively elects a distribution."
3. The first sentence of Section 9.5 of the Plan shall be deleted
and the following shall be substituted therefor:
"The Trustee shall pay any benefit provided hereunder other than a
lump sum payment or a Direct Rollover pursuant to Section 9.9 by the
purchase of a commercial annuity contract and the distribution of such
contract to the Member or beneficiary."
-2-
<PAGE> 3
4. The following new Section 9.9 shall be added to Article IX of
the Plan:
"9.9 DIRECT ROLLOVER ELECTION.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Section, a Distributee may elect, at the time and in the manner
prescribed by the Committee, to have all or any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover. The preceding
sentence notwithstanding, a Distributee may elect a Direct Rollover
pursuant to this Section only if such Distributee's Eligible Rollover
Distributions during the Plan Year are reasonably expected to total
$200 or more. Furthermore, if less than 100% of the Member's Eligible
Rollover Distribution is to be a Direct Rollover, the amount of the
Direct Rollover must be $500 or more. Prior to any Direct Rollover
pursuant to this Section, the Distributee shall furnish the Committee
with a statement from the plan, account, or annuity to which the
benefit is to be transferred verifying that such plan, account, or
annuity is, or is intended to be, an Eligible Retirement Plan.
(b) No less than thirty days and no more than ninety days
before his Benefit Commencement Date, the Committee shall inform the
Distributee of his Direct Rollover right pursuant to this Section. A
distribution or Direct Rollover of the Distributee's benefit may
commence less than thirty days after such notice is given, provided
that (1) the Committee clearly informs the Distributee that the
Distributee has a right to a period of at least thirty days after
receiving the notice to consider the decision of whether or not to
elect a Direct Rollover and (2) the Distributee, after receiving the
notice, affirmatively elects either a distribution or a Direct
Rollover or a combination thereof."
II. Effective August 5, 1993, the following shall be added to the end of
Section 1.1(14) of the Plan:
"Hours of Service shall also include any hours required to be credited
by federal law other than the Act or the Code, but only under the
conditions and to the extent so required by such federal law."
III. Effective January 1, 1994, the last sentence of Section 1.1(7) of the
Plan shall be deleted and the following shall be substituted therefor:
"The above notwithstanding, the Compensation of any Member taking into
account for purposes of the Plan shall be limited to $150,000 for any
Plan Year with such limitation to be (i) adjusted automatically to
reflect any amendment to section 401(a)(17) of the Code and any
cost-of-living increases authorized by section 401(a)(17) of the Code,
(ii) prorated for a Plan Year
-3-
<PAGE> 4
of less than twelve months and to the extent otherwise required by
applicable law, and (iii) in the case of a Member who is either a
five-percent owner of the Company (within the meaning of section
416(i)(1)(A)(iii) of the Code) or is one of the ten most Highly
Compensated Employees for the Plan Year and who has a spouse and/or
lineal descendants who are under the age of nineteen as of the end of
a Plan Year who receive Compensation during such Plan Year, prorated
and allocated among such Member, his spouse, and/or lineal descendants
under the age of nineteen based on the Compensation for such Plan Year
of each such individual."
IV. Effective December 31, 1994, the following sentence shall be added at
the end of Section 1.1(26) of the Plan:
"In addition to the foregoing, with respect to a Member or beneficiary
entitled to a benefit hereunder pursuant to the Member's termination
of employment for any reason whatsoever, the last day of the month
next preceding the date on which such Member or beneficiary elects to
receive such benefit shall be a Valuation Date."
V. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 1st day of September, 1994.
ADMINISTRATIVE COMMITTEE
ENSTAR NATURAL GAS COMPANY
PROFIT BY SERVICE PLAN
FOR SALARIED EMPLOYEES
By /s/ R.F. BARNES
______________________________________
R.F. BARNES
-4-
<PAGE> 1
EXHIBIT 10.10
THIRD AMENDMENT TO
ENSTAR NATURAL GAS COMPANY
PROFIT BY SERVICE PLAN
FOR CLASSIFIED EMPLOYEES
WHEREAS, SEAGULL ENERGY CORPORATION (the "Company") has heretofore
adopted and maintains the ENSTAR NATURAL GAS COMPANY PROFIT BY SERVICE PLAN FOR
CLASSIFIED EMPLOYEES (the "Plan"); and
WHEREAS, Section 15.1 of the Plan provides the Administrative
Committee appointed by the Chief Executive Officer of the Company to administer
the Plan (the "Committee") shall have the authority to amend the Plan to comply
with applicable statutory or regulatory requirements; and
WHEREAS, the Committee desires to amend the Plan for this purpose;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1993:
1. The following new Paragraphs (8A), (9A), (11A) and (11B) shall
be added to Section 1.1 of the Plan:
"(8A) DIRECT ROLLOVER: A payment by the Plan to an Eligible
Retirement Plan designated by a Distributee.
(9A) DISTRIBUTEE: Each (A) Member entitled to an Eligible Rollover
Distribution, (B) Member's surviving spouse with respect to
the interest of such surviving spouse in an Eligible Rollover
Distribution, and (C) former spouse of a Member who is an
alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, with regard to the
interest of such former spouse in an Eligible Rollover
Distribution.
(11A) ELIGIBLE RETIREMENT PLAN: (A) With respect to a Distributee
other than a surviving spouse, an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified plan described in section 401(a) of the Code, which
under its provisions accepts such Distributee's Eligible
Rollover Distribution and (B) with respect to a Distributee
who is a surviving spouse, an individual retirement account
described in section
<PAGE> 2
408(a) of the Code or an individual retirement annuity
described in section 408(b) of the Code.
(11B) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of all or any
portion of the Accounts of a Distributee other than (A) a
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the
Distributee's designated beneficiary or for a specified period
of ten years or more, (B) a distribution to the extent such
distribution is required under section 401(a)(9) of the Code,
(C) the portion of a distribution that is not includable in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities), and (D) any other distribution so designated by
the Internal Revenue Service in revenue rulings, notices, and
other guidance of general applicability."
2. The last sentence of Section 9.1(b) of the Plan shall be
deleted and the following shall be substituted therefor:
"The Committee shall furnish information pertinent to his consent to
each Member no less than thirty days and no more than ninety days
before his Benefit Commencement Date, and the furnished information
shall include a general description of the material features of, and
an explanation of the relative values of, the alternative forms of
benefit available under the Plan and must inform the Member of his
right to defer his Benefit Commencement Date and of his Direct
Rollover right pursuant to Section 9.9 below, if applicable. If a
distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than thirty days
after the notice required under section 1.411(a)-(11)(c) of the
Treasury regulations is given, provided that (i) the Committee clearly
informs the Member that the Member has a right to a period of at least
thirty days after receiving the notice to consider the decision of
whether or not to select a distribution (and, if applicable, a
particular distribution option) and (ii) the Member, after receiving
the notice, affirmatively elects a distribution."
3. The first sentence of Section 9.5 of the Plan shall be deleted
and the following shall be substituted therefor:
"The Trustee shall pay any benefit provided hereunder other than a
lump sum payment or a Direct Rollover pursuant to Section 9.9 by the
purchase of a commercial annuity contract and the distribution of such
contract to the Member or beneficiary."
-2-
<PAGE> 3
4. The following new Section 9.9 shall be added to Article IX of
the Plan:
"9.9 DIRECT ROLLOVER ELECTION.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Section, a Distributee may elect, at the time and in the manner
prescribed by the Committee, to have all or any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover. The preceding
sentence notwithstanding, a Distributee may elect a Direct Rollover
pursuant to this Section only if such Distributee's Eligible Rollover
Distributions during the Plan Year are reasonably expected to total
$200 or more. Furthermore, if less than 100% of the Member's Eligible
Rollover Distribution is to be a Direct Rollover, the amount of the
Direct Rollover must be $500 or more. Prior to any Direct Rollover
pursuant to this Section, the Distributee shall furnish the Committee
with a statement from the plan, account, or annuity to which the
benefit is to be transferred verifying that such plan, account, or
annuity is, or is intended to be, an Eligible Retirement Plan.
(b) No less than thirty days and no more than ninety days
before his Benefit Commencement Date, the Committee shall inform the
Distributee of his Direct Rollover right pursuant to this Section. A
distribution or Direct Rollover of the Distributee's benefit may
commence less than thirty days after such notice is given, provided
that (1) the Committee clearly informs the Distributee that the
Distributee has a right to a period of at least thirty days after
receiving the notice to consider the decision of whether or not to
elect a Direct Rollover and (2) the Distributee, after receiving the
notice, affirmatively elects either a distribution or a Direct
Rollover or a combination thereof."
II. Effective August 5, 1993, the following shall be added to the end of
Section 1.1(14) of the Plan:
"Hours of Service shall also include any hours required to be credited
by federal law other than the Act or the Code, but only under the
conditions and to the extent so required by such federal law."
III. Effective December 31, 1994, the following sentence shall be added at
the end of Section 1.1(26) of the Plan:
"In addition to the foregoing, with respect to a Member or beneficiary
entitled to a benefit hereunder pursuant to the Member's termination
of employment for any reason whatsoever, the last day of the month
next preceding the date on which such Member or beneficiary elects to
receive such benefit shall be a Valuation Date."
-3-
<PAGE> 4
IV. Effective January 1, 1997, the last sentence of Section 1.1(7) of the
Plan shall be deleted and the following shall be substituted therefor:
"The above notwithstanding, the Compensation of any Member taking into
account for purposes of the Plan shall be limited to $150,000 for any
Plan Year with such limitation to be (i) adjusted automatically to
reflect any amendment to section 401(a)(17) of the Code and any
cost-of-living increases authorized by section 401(a)(17) of the Code,
(ii) prorated for a Plan Year of less than twelve months and to the
extent otherwise required by applicable law, and (iii) in the case of
a Member who is either a five-percent owner of the Company (within the
meaning of section 416(i)(1)(A)(iii) of the Code) or is one of the ten
most Highly Compensated Employees for the Plan Year and who has a
spouse and/or lineal descendants who are under the age of nineteen as
of the end of a Plan Year who receive Compensation during such Plan
Year, prorated and allocated among such Member, his spouse, and/or
lineal descendants under the age of nineteen based on the Compensation
for such Plan Year of each such individual."
V. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED this 1st day of September, 1994.
ADMINISTRATIVE COMMITTEE
ENSTAR NATURAL GAS COMPANY
PROFIT BY SERVICE PLAN
FOR CLASSIFIED EMPLOYEES
/s/ R.F. BARNES
By ________________________
-4-
<PAGE> 1
EXHIBIT 10.30
SEAGULL ENERGY CANADA LTD.
RETIREMENT PLAN
JANUARY 1994
<PAGE> 2
Table Of Contents
<TABLE>
<S> <C>
Section 1 - Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 - Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3 - Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4 - Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5 - Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6 - Retirement Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7 - Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8 - Forms of Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9 - Disability of a Participant . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 10 - Death of a Participant . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11 - Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12 - Termination of Service . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 13 - Administration of The Plan . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14 - Funding Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 15 - Amendment or Termination of the Plan . . . . . . . . . . . . . . . . . . . 30
Section 16 - Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17 - General Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE> 3
Section 1 - Introduction
1.01 The Seagull Energy Canada Ltd. Retirement Plan is hereby established
by the Company effective January 4, 1994.
1.02 The establishment and maintenance of the Plan is conditional upon the
Plan receiving and retaining such registration with the necessary
regulatory authorities as may be required for the Company to deduct
its contributions within the meaning of the Income Tax Act, and any
other Applicable Legislation.
- 1 -
<PAGE> 4
Section 2 - Interpretation
2.01 TERMS
For the purposes of this Plan, including this Section 2, the
expressions set out below shall have the respective meaning attributed
thereto.
2.02 ACCOUNT means the aggregate of all amounts constituting each
Participant's holdings under the Plan.
2.03 ADMINISTRATOR means the incumbent President of Seagull Energy Canada
Ltd.
2.04 APPLICABLE LEGISLATION means the Employment Pension Plans Act, the
Income Tax Act, and any other legislation of Canada or a province or
territory thereof, together with any regulations, rules, guidelines,
or conditions established or prescribed from time to time affecting
registered pension plans, to the extent such legislation is applicable
with respect to the Plan or a Participant.
2.05 BENEFICIARY means a person designated under Section 11.
2.06 COMPANY means Seagull Energy Canada Ltd. and any affiliated company
designated by Seagull Energy Canada Ltd. to be a participating
employer in the Plan; provided that any reference herein to any action
to be undertaken or discretion to be exercised by the Company
hereunder means Seagull Energy Canada Ltd. acting through its Board of
Directors or any person or group of persons authorized to do so,
either directly or indirectly, by the Board of Directors of Seagull
Energy Company Ltd.
2.07 COMPANY'S FORFEITURE ACCOUNT means the account to which is credited
the amounts in the Account under Section 12.01(b).
- 2 -
<PAGE> 5
2.08 CONTINUOUS SERVICE means the period of uninterrupted active service by
a Participant from the Participant's most recent date of employment
with the Company and rendered to the date of his termination of his
service with the Company, death, or retirement, whichever is the
earliest. Continuous Service shall include
(1) any educational leave of absence of an Employee from his
duties which does not exceed two (2) years and is granted with
the consent of the Company;
(2) any absence of an Employee due to maternity leave, sick or
accident leave which cause is certified by a medical
practitioner as being a disabling illness or injury, or such
other leave which does not exceed two (2) years and is
recognized by the Company;
(3) service with any predecessor company, provided the Company
recognizes such service for purposes of the Plan;
(4) any period of temporary absence or lay-off by the Company,
provided such temporary absence or lay-off does not exceed a
continuous twenty six (26) week period; and
(5) for those Participants pursuant to Section 3.01, the period of
continuous service under the Prior Plan.
Service occurring before a break in Continuous Service shall not
constitute Continuous Service.
2.09 CREDITED INTEREST means the interest or changes in value that can
reasonably be attributed to the operation of the Fund as a result of
interest, dividends, realized and unrealized capital gains or capital
losses, net of expenses attributable thereto, with respect to
investments under the Plan, as determined by the Funding Agency.
Credited Interest shall be calculated and allocated by the Funding
Agency to each Account at the end of each month.
- 3 -
<PAGE> 6
2.10 DISABLED means, with respect to a Participant, suffering from a
physical or mental impairment that prevents the Participant from
performing the duties of his employment in which he was engaged prior
to the commencement of the impairment and which is certified, in
writing, by a medical doctor licensed in Canada or, with the Company's
consent, where the Participant resides.
2.11 EFFECTIVE DATE means January 4, 1994.
2.12 EMPLOYEE means any person employed by the Company on a permanent
basis, plus any person employed by the Company on other than a
permanent basis, provided such person has completed two consecutive
calendar years of employment during which he earned not less than 35%
of the YMPE.
2.13 EMPLOYMENT PENSION PLANS ACT means the Employment Pension Plans Act,
S.A. 1986 c. E-10.05 and the Regulations thereunder, each as amended
or replaced from time to time.
2.14 FUND means the corpus and all earnings, appreciations or additions
therein and thereto held by the Funding Agency under the Funding
Agreement for the purposes of the Plan.
2.15 FUND MANAGER means the individual or organization, and successors
thereof as the Company may appoint from time to time to manage and
make decisions regarding the investments of the Fund.
2.16 FUNDING AGENCY means the trust company, trustees, insurance company or
successors thereof as the Company may appoint to hold the Fund
pursuant to the Funding Agreement, provided such Agency is recognized
for such purpose under the Employment Pension Plans Act.
2.17 FUNDING AGREEMENT means the agreement or contract entered into between
the Company and the Funding Agency establishing the Fund.
- 4 -
<PAGE> 7
2.18 INCOME TAX ACT means the Income Tax Act, S.C. 1970-71-72, c. 63 and
the Regulations thereunder, and where applicable includes the
provisions of Information Circular 72-13R8 issued by the Department of
National Revenue, each as amended or replaced from time to time.
2.19 LOCKED-IN RETIREMENT ACCOUNT means an RRSP which is eligible for
receipt of locked-in retirement funds under the Employment Pension
Plans Act and the Income Tax Act.
2.20 LONG TERM DISABILITY PLAN means any insured disability plan sponsored
by the Company which provides for the continuation of income after the
expiry of the Company's short term disability plan.
2.21 MONEY PURCHASE LIMIT means the maximum number of dollars permitted
under the Income Tax Act to be contributed by or on behalf of a
Participant to a Registered Pension Plan in any calendar year.
2.22 NORMAL RETIREMENT DATE means the first day of the month coinciding
with or next following the date on which the Participant attains or
would attain age sixty-five (65).
2.23 PARTICIPANT means any Employee who fulfils the eligibility
requirements set forth in Section 3 hereof and whose application for
participation has been accepted and recorded by the Company. A
Participant shall include a former Employee who continues to be
entitled to benefits or rights under the Plan.
2.24 PLAN means the Seagull Energy Canada Ltd. Retirement Plan as provided
herein and as amended or replaced from time to time.
2.25 PLAN YEAR means the calendar year.
2.26 PRIOR PLAN means the pension plan that was provided for employees of
Novalta Resources Inc., as it was in effect on January 3, 1994.
2.27 REGISTERED PENSION PLAN and REGISTERED RETIREMENT SAVINGS PLAN bear
the respective meanings attributed thereto under the Income Tax Act.
2.28 REGULAR GROSS EARNINGS means the basic monthly remuneration received
by the Participant, as determined by the Company.
2.29 SPOUSE means, in relation to a Participant,
- 5 -
<PAGE> 8
(a) a person of the opposite sex who at the relevant time was
legally married to the Participant and was not living separate
and apart from him, or
(b) if there is no person to whom Section 2.29(a) applies, a
person of the opposite sex who lived in a conjugal
relationship with the Participant for the one (1) year period
immediately preceding the relevant time and was, during that
period, held out by the Participant in the community in which
they live as his consort.
2.30 SUPERINTENDENT means the Superintendent of Pensions for the Province
of Alberta, appointed under the Employment Pension Plans Act.
2.31 YMPE means the Year's Maximum Pensionable Earnings as applicable under
the Canada Pension Plan or the Quebec Pension Plan, as the case may
be.
2.32 NUMBER AND GENDER
In this Plan, words importing the singular include the plural and vice
versa; and words importing the masculine gender include the feminine
and vice versa.
- 6 -
<PAGE> 9
2.33 HEADINGS
Section headings are convenient references only and shall not be
deemed to be a part of the substance of this instrument or in any way
to enlarge or limit the contents of any section.
- 7 -
<PAGE> 10
Section 3 - Eligibility and Participation
3.01 PARTICIPANTS OF THE PRIOR PLAN
Each Employee who was a participant of the Prior Plan shall become a
Participant of the Plan on the Effective Date.
3.02 OTHER EMPLOYEES
Any other Employee who is not referred to in Section 3.01 shall become
a Participant of the Plan on the first day of his employment.
3.03 RE-EMPLOYMENT AFTER TERMINATION
A Participant or any other Employee who terminates employment and is
subsequently re-employed by the Employer shall be treated as a new
Employee for all purposes of the Plan. This, however, shall not be
construed as alienating any previously granted benefit in which the
Participant had been vested as of his prior termination of employment.
3.04 RE-EMPLOYMENT AFTER RETIREMENT
A former Participant who has retired under the provisions of the Plan
and who is subsequently re-employed by the Employer shall be treated
as a new Employee for all purposes of the Plan. This, however, shall
not be construed as alienating any previously granted benefit in which
the Participant had been vested as of his prior termination of
employment.
3.05 TERMINATION OF PARTICIPATION NOT PERMITTED
A Participant may not terminate his participation in the Plan while he
remains an Employee.
3.06 NON-DUPLICATION OF PARTICIPATION
An Employee who is participating in any other Registered Pension Plan
of the Employer shall not participate in the Plan during his period of
participation in the other plan.
- 8 -
<PAGE> 11
3.07 WAIVER OF ELIGIBILITY REQUIREMENTS
The Company may, at its sole discretion, waive or modify any or all of
the foregoing provisions of Section 3 with respect to any Employee, or
group of Employees, for whom it deems it desirable and appropriate to
do so, subject to the provisions of any Applicable Legislation.
- 9 -
<PAGE> 12
Section 4 - Contributions
4.01 EMPLOYEE CONTRIBUTIONS
Each Employee who is a Participant is not permitted to make
contributions to the Plan.
4.02 COMPANY CONTRIBUTIONS
The Company shall contribute monthly to the Fund an amount equal to
six and six tenths percent (6.6%) of the Participant's monthly Regular
Gross Earnings. However, such contributions in any calendar year
shall not exceed the Money Purchase Limit for such calendar year.
Each participating employer shall contribute only on behalf of its own
Employees who are Participants under the Plan.
4.03 DISABLED PARTICIPANT
If a Participant is Disabled, the Company shall remit contributions
pursuant to Section 4.02 to the Plan in respect of such Participant
during the period in which the Participant is Disabled; provided that:
(a) such contributions shall not exceed the amount which the
Company would have contributed on behalf of the Participant
had he not been Disabled, based upon his last full rate of
Regular Gross Earnings; and
(b) contributions under this Section 4.04 shall not be made for
any period in excess of the waiting or eligibility period, if
any, applicable to such Participant under the Company's Long
Term Disability Plan.
- 10 -
<PAGE> 13
4.04 APPLICATION OF FORFEITURES
The Company may apply all or any portion of the Company's Forfeiture
Account to reduce the total Company contributions to the Plan for any
month, or it may direct that the expenses of the Plan be paid from
such account.
4.05 REFUND OF FORFEITURES
(a) The Company may, subject to the advance approval of the
Superintendent, receive a refund of all or a portion of the
amount in the Company's Forfeiture Account.
(b) Notwithstanding Section 4.05(a), any amount in the Company's
Forfeiture Account which has not been used pursuant to Section
4.04 by the end of the calendar year following the year in
which the amount was forfeited shall be refunded to the
Company at that time, subject to the prior approval of the
Superintendent.
4.06 TRANSFERS OF FUNDS FROM OTHER SOURCES
The Company shall accept any transfer from the Prior Plan on behalf of
a Participant. The Company may, in its absolute discretion, accept on
behalf of a Participant a transfer to the Plan of funds held in
another Registered Pension Plan, or Registered Retirement Savings Plan
in the name of that Participant. Any transfer to the Plan shall be
subject to all restrictions imposed on such transfers by any
Applicable Legislation.
4.07 RETURN OF CONTRIBUTIONS
Subject to the prior written approval of the Superintendent, an amount
contributed by the Employer under Section 4.02 may be refunded at any
time to the Employer as applicable where such action is required to
avoid the revocation of registration of the Plan under the Income Tax
Act.
- 11 -
<PAGE> 14
4.08 REMITTANCE OF COMPANY CONTRIBUTIONS
The Company shall remit to the Funding Agent, for deposit to the
Pension Fund, all contributions required to be made by the Employer
pursuant to Section 4.02 and 4.03, subject to Section 4.04, within 30
days following the end of the month to which they relate.
- 12 -
<PAGE> 15
Section 5 - Accounts
5.01 ACCOUNTS
An Account will be maintained for each Participant to which will be
credited all contributions made on his behalf by the Employer in
accordance with Sections 4.02, 4.03, 4.04 and 4.06.
5.02 INTEREST ON CONTRIBUTIONS
At the end of each month Credited Interest will be added to all
Accounts. Credited Interest shall not be applied at any other time.
5.03 ALLOCATIONS MADE MONTHLY
All contributions shall be allocated by the Funding Agency to the
Accounts of the Participants not later than the end of the month in
which they are received by the Funding Agency.
- 13 -
<PAGE> 16
Section 6 - Retirement Dates
6.01 RETIREMENT OF A PARTICIPANT
For purposes of this Plan, retirement shall commence on the first day
of the calendar month coincident with or next following the cessation
of the employment of a Participant who is retiring from the Plan.
6.02 NORMAL RETIREMENT DATE
A Participant may retire on his Normal Retirement Date.
6.03 EARLY RETIREMENT DATE
A Participant may elect to retire on the first day of any month which
falls within the one hundred and twenty (120) months prior to his
Normal Retirement Date. A Participant who is eligible to retire under
this Section 6.03 and whose employment with the Company is terminated
for any reason other than death may elect to be treated for the
purposes of the Plan as if his employment has been terminated under
Section 12 of the Plan.
6.04 POSTPONED RETIREMENT
(a) Subject to Section 6.04(b), a Participant may postpone his
normal retirement and remain in the service of the Company
beyond his Normal Retirement Date, in which case he will
continue to accrue benefits under the Plan.
(b) A Participant's actual date of retirement for purposes of this
Plan shall not be postponed beyond the first day of December
in the year in which he attains age seventy-one (71).
- 14 -
<PAGE> 17
Section 7 - Retirement Benefits
7.01 BENEFITS ON RETIREMENT
Upon retirement, a Participant may elect the following:
(a) a life annuity in the form determined pursuant to Section 8
which may be purchased by the sum of the amount of his
Account;
(b) the transfer of the sum of the amount in his Account to a
Locked-In Retirement Account; or
(c) any other form of settlement permitted under Applicable
Legislation at that time.
7.02 SMALL BENEFIT COMMUTATION
If the value of the Participant's Account at his date of retirement is
less than 4% of the YMPE for that year, or the resulting monthly
pension is less than 1/12 of 2% of the YMPE for that year, or such
other amount as may be prescribed under Applicable Legislation, the
Participant shall receive a lump sum payment or a transfer to an
unrestricted RRSP in the Participant's name, equal to the value of his
Account in full discharge of all obligations under the Plan.
7.03 APPLICATION FOR PENSION
A Participant eligible for retirement benefits under this Plan, or his
legal representative, must make written application to the Company on
the forms prescribed by the Company before any such benefits are
payable. An application for payment for retirement benefits may be
made at any time following sixty (60) days prior to the Participant's
qualification to retire under the Plan, but not later than any date
prescribed under the Income Tax Act.
- 15 -
<PAGE> 18
7.04 UNCLAIMED PENSION
In the event a Participant, his legal representative or anyone else
satisfactory to the Company does not give notice of his claim for
retirement benefits, the Account of the Participant will be retained
in the Fund until such advice is received. During such period the
Account shall continue to earn Credited Interest.
- 16 -
<PAGE> 19
Section 8 - Forms of Retirement Benefits
8.01 NORMAL FORM OF PENSION FOR PARTICIPANTS WITHOUT A SPOUSE
The normal form of pension for Participants without a Spouse shall be
a life annuity payable in equal monthly instalments to and including
the month in which the Participant dies, in arrears, provided that
should the Participant die prior to having received sixty (60) monthly
payments, the balance of the sixty (60) monthly payments shall be paid
to the Participant's Beneficiary.
8.02 NORMAL FORM OF PENSION FOR PARTICIPANT WITH A SPOUSE
The normal form of pension for a Participant with a Spouse shall be a
joint and surviving spouse annuity such that:
(a) if the Participant's Spouse survives the Participant, the
Spouse shall, during the Spouse's lifetime, receive sixty
percent (60%) of the monthly pension which had been payable to
the Participant during his lifetime; and
(b) the benefit shall be payable to the Participant or Spouse, as
applicable, in equal monthly instalments, in arrears to and
including the payment for the month in which the recipient
dies.
8.03 OPTIONAL FORMS
In lieu of the normal form of retirement benefit described in Sections
8.01 and 8.02, a Participant may elect any optional form of annuity
which may be purchased by the sum in his Account provided that:
(a) the Company agrees to such option;
(b) such other optional form is permitted under the Employment
Pension Plans Act; and
(c) such optional form is permitted under the Income Tax Act.
- 17 -
<PAGE> 20
8.04 OPTIONAL FORM ELECTION DATE
A Participant who wishes to make an election under Section 8.03 shall
submit written election to the Company at least thirty (30) days prior
to the date of commencement of his pension payments. Should a
Participant fail to make such an election within the specified period,
the benefit shall be payable in the normal form described in Section
8.01 or 8.02, as applicable.
8.05 LIMIT ON ELECTIONS
A Participant who has a Spouse may not elect an optional form under
Section 8.03 which would reduce the benefit entitlement of the Spouse
without the written approval of the Spouse on a form and in the manner
prescribed under the Employment Pension Plans Act.
- 18 -
<PAGE> 21
Section 9 - Disability of a Participant
9.01 PAYMENTS IN EVENT OF DISABILITY
Subject to Section 9.02, if a Participant is Disabled and he is in
receipt of benefits under any Long Term Disability Plan sponsored by
the Company, the Participant may, subject to the approval of the
Company, elect to receive the value of his Account in accordance with
Section 7 and in such manner as may be approved by the Superintendent.
9.02 WAIVER OF SPOUSAL BENEFIT REQUIRED
If a Disabled Participant who has a Spouse wishes to receive the value
of his Account in accordance with Section 9.01 other than in the form
of a joint and survivor annuity, or as a joint and survivor annuity
which provides his Spouse with a monthly benefit of less than sixty
per cent (60%) of the monthly benefit received by the Participant
during his lifetime, the Participant's application for such benefit
must include the written approval of the Spouse in the form and manner
prescribed under the Employment Pension Plans Act.
- 19 -
<PAGE> 22
Section 10 - Death of a Participant
10.01 DEATH PRIOR TO RETIREMENT WITHOUT A SPOUSE
If a Participant dies prior to commencement of his retirement
benefits, provided the Participant does not have a Spouse on his date
of death, the Beneficiary shall be entitled to a lump sum refund of
the value of the Participant's Account. If the Beneficiary is
eligible under the Income Tax Act to do so, he may elect to have the
funds transferred to an RRSP in his name. The value of the Account
shall include Credited Interest calculated to the end of the month
immediately preceding the date of such refund.
10.02 DEATH PRIOR TO RETIREMENT WITH A SPOUSE
If a Participant dies prior to the commencement of his retirement
benefits and if the Participant has a Spouse on the date of his death,
the Spouse may elect to receive the value of the Participant's Account
as:
(a) a lump sum payment, provided the Participant had not, at the
date of death, completed five (5) years of Continuous Service;
(b) a transfer to a Registered Retirement Savings Plan in the name
of the Spouse, provided the Participant had not, at the date
of death, completed five (5) years of Continuous Service;
(c) a transfer to a Locked-In Retirement Account the name of the
Spouse, if at the date of his death the Participant had
completed five (5) years of Continuous Service;
(d) a transfer to the Spouse's Registered Pension Plan, provided
the administrator of that plan will accept the transfer; or
(e) a transfer to a life insurance company to purchase a deferred
or immediate life annuity for the Spouse;
- 20 -
<PAGE> 23
provided such payment or transfer is under any other terms and
conditions prescribed under the Employment Pension Plans Act and the
Income Tax Act and provided that, if a deferred annuity is selected
under Section 10.02(e), the annuity will commence prior to:
(f) the end of the year in which the Spouse will attain age
seventy-one (71), or
(g) if later, within one (1) year of the Participant's death.
10.03 DEADLINE FOR ELECTION OF OPTIONS
Should the Spouse fail to advise the Company of his election within
ninety (90) days of receipt of the election forms prescribed under the
Plan, the Company shall cause the benefit to be paid as a lifetime
pension pursuant to Section 10.02(1)(e), in which case the annuity
shall commence payment:
(a) upon the Participant's Normal Retirement Date; or
(b) if the Participant was age sixty-five (65) or older on the
date of his death, as soon as practicable, but in no event
later the earlier of
(i) one (1) year after the death of the Participant, and
(ii) the end of the calendar year in which the Spouse
attains age 71.
10.04 DEATH OF A PARTICIPANT AFTER RETIREMENT
If a Participant dies after having commenced receipt of pension
benefits, any benefit to which the Participant's Spouse or Beneficiary
shall be entitled shall be in accordance the form of benefit being
received under Section 8.
- 21 -
<PAGE> 24
10.05 DEATH OF A SPOUSE PRIOR TO BENEFIT TRANSFER
If a Spouse dies after having become entitled to receive benefits
under this Section 10 and prior to those benefits having been
transferred to or on behalf of the Spouse, the benefits shall be paid
to the Spouse's beneficiary or, if there is no such beneficiary, to
the Spouse's estate.
- 22 -
<PAGE> 25
Section 11 - Designation of Beneficiary
11.01 DESIGNATION AND CHANGES OF BENEFICIARY
Subject to Section 11.02, a Participant may upon making application
for participation designate a Beneficiary to receive the benefits
payable under the Plan in the event of the Participant's death, and
may also, by written notice to the Company during such Participant's
lifetime, alter or revoke such designation from time to time subject
to any applicable law. Any such written notice shall be in such form
and executed in such manner as the Company may require. If no
Beneficiary has been validly designated or if the designated
Beneficiary is not alive at the time of the Participant's death, the
Participant's estate shall be the Beneficiary.
11.02 LIMITATION ON ELECTION
If a Participant has a Spouse, the Spouse shall be the Beneficiary.
11.03 BURDEN OF PROOF ON CLAIMANT
The Company may require the delivery of such documents as it deems
necessary in order to be assured that the payment of benefits is
properly made and is made to the proper party.
- 23 -
<PAGE> 26
Section 12 - Termination of Service
12.01 TERMINATION WITH LESS THAN FIVE YEARS OF CONTINUOUS SERVICE
In the event that a Participant's employment terminates for any reason
other than retirement or death prior to the completion of five (5)
years of Continuous Service,
(a) if such Participant's Continuous Service commenced prior to
the Effective Date, then he shall be entitled to receive his
Account balance, together with Credited Interest thereon to
the date of withdrawal of such Account; or
(b) if such Participant's Continuous Service commenced on or after
the Effective Date, then no benefit is payable and the value
of his Account shall be forfeited and credited to the
Company's Forfeiture Account; however, should any part of his
Account be derived from an amount transferred to the Plan
pursuant to Section 4.06, then such portion of his Account
shall not be forfeited and shall be payable to him, subject to
any Applicable Legislation, together with Credited Interest
thereon to the date of withdrawal of such portion of his
Account.
12.02 TERMINATION WITH FIVE OR MORE YEARS OF CONTINUOUS SERVICE
Upon completion of five (5) years of Continuous Service, a Participant
whose employment with the Company terminates for any reason other than
retirement or death shall be entitled to receive his Account balance,
together with Credited Interest therein to the date of withdrawal of
such Account.
12.03 OPTIONS ON SETTLEMENT
Subject to Section 12.04, a Participant who terminates pursuant to
Section 12.02 shall be entitled to receive the value of his Account
as:
(a) a transfer to a Locked-In Retirement Account in the name of
the Participant,
- 24 -
<PAGE> 27
(b) a transfer to a Registered Pension Plan if the administrator
of such plan agrees to accept such transfer; or
(c) a transfer to a life insurance company to purchase an
immediate or a deferred life annuity; provided that payments
under such deferred annuity must commence prior to the end of
the year in which the Participant attains age seventy-one
(71),
provided such transfer is in accordance with the Employment Pension
Plans Act and the Income Tax Act.
12.04 SMALL BENEFIT COMMUTATION
If the benefit payable under Section 12.02 is not more than 4% of the
YMPE in the year of the Participant's termination of Continuous
Service, or the resulting monthly pension is less than 1/12 of 2% of
the YMPE for that year, or such other amount as may be prescribed
under Applicable Legislation, the Participant shall receive a lump sum
payment or a transfer to an unrestricted RRSP in the Participant's
name, equal to the value of his Account in full discharge of all
obligations under the Plan.
12.05 ADVICE OF BENEFITS UNDER PLAN
Within sixty (60) days of the date of termination, the Company will
advise the Participant of his benefits under the Plan.
- 25 -
<PAGE> 28
12.06 FAILURE TO ELECT
Should a Participant fail to advise the Company of his election
pursuant to Sections 12.01 and 12.02, as applicable, within ninety
(90) days of his receipt of the election forms prescribed under the
Plan, the Company shall provide that the value of the Account to which
he is entitled be applied to provide a deferred life annuity in the
normal form under Section 8.01 or 8.02, as applicable, commencing on
the Participant's Normal Retirement Date.
- 26 -
<PAGE> 29
Section 13 - Administration of The Plan
13.01 POWERS OF THE ADMINISTRATOR
The Administrator shall:
(1) make and enforce such rules and regulations as it shall deem
necessary or proper for the efficient administration of the
Plan;
(2) interpret the Plan, its interpretation thereof to be final and
conclusive;
(3) decide all questions concerning the Plan including the
eligibility of any employees to participate in the Plan, such
decisions to be final and conclusive;
(4) compute the amount of payments of Participants and
Beneficiaries in accordance with the provisions of the Plan
and Applicable Legislation, and determine the person or
persons to whom such payments shall be made, such computations
and determinations to be final and conclusive;
(5) authorize payments to be made under the Plan; and
(6) prepare or arrange for preparation of all requisite accounts
and records pertaining to the Plan.
13.02 UNIFORM APPLICATION
Whenever, in the administration of the Plan, any action by the Company
is required, such action shall be uniform in nature as applied to all
persons similarly situated.
- 27 -
<PAGE> 30
13.03 LIMITATION OF LIABILITY
In administering the Plan neither the Board of Directors nor any
member thereof, nor the Company, nor any officer or employee thereof,
shall be liable for any acts of omission or commission, except for his
or its own individual, wilful and intentional malfeasance or
misfeasance. The Company and its officers and directors shall be
entitled to rely conclusively on all tables, valuations, certificates,
opinions and reports which shall be furnished by any actuary,
accountant, Fund Manager, Funding Agency, counsel or other expert who
shall be employed or engaged by the Company.
The Company shall indemnify and hold harmless the Administrator, and
any person to whom the Administrator may delegate any task or
function, against any and all expenses and liabilities arising out of
his administrative functions or fiduciary responsibilities, including
any expenses and liabilities that are caused by or result from an act
or omission constituting negligence in the performance of such
functions or responsibilities, but excluding expenses and liabilities
that are caused by or result from his own gross negligence or wilful
misconduct. Expenses against which such person shall be indemnified
hereunder shall include, without limitation, the amounts of any
settlement or judgement, costs, counsel fees and related charges
reasonably incurred in connection with a claim asserted or a
proceeding brought or settlement thereof.
13.04 APPLICATION AND ELECTIONS
All applications and elections for any purpose of the Plan shall be
made on such forms and shall be filed in such manner as may be
prescribed by Applicable Legislation or otherwise, determined from
time to time by the Company.
- 28 -
<PAGE> 31
Section 14 - Funding Benefits
14.01 ESTABLISHMENT OF THE FUND
The Company will establish and maintain, during the term of this Plan,
a Fund to be held and invested by the Funding Agency in accordance
with the Funding Agreement and subject to Applicable Legislation.
14.02 CONTRIBUTIONS TO FUND
All contributions in respect of the Plan shall be paid monthly into
the Fund, which shall be held in trust and administered and invested
by the Funding Agency in accordance with the Funding Agreement, the
Income Tax Act, and the Employment Pension Plans Act.
14.03 RESTRICTION ON USE OF FUND
No person shall have any interest in, nor right to, any part of the
Fund except and to the extent provided in this Plan.
14.04 CHANGING FUNDING AGENCY
The Company may remove the Funding Agency and upon such removal or
upon resignation of the Funding Agency, the Company shall appoint a
successor Funding Agency.
14.05 FISCAL YEAR
The fiscal year of the Fund shall be the same as the Plan Year.
- 29 -
<PAGE> 32
Section 15 - Amendment or Termination of the Plan
15.01 COMPANY'S RIGHT TO AMEND OR TERMINATE THE PLAN
The Company retains the right to amend or modify or terminate the Plan
in whole or in part, at any time and from time to time, and in such
manner and to such extent as it may deem advisable; provided that:
(1) no amendment shall have the effect of reducing any
Participant's then existing interest in the Fund;
(2) no amendment shall have the effect of diverting any part of
the Fund to purposes other than for the exclusive benefit of
the Participants; and
(3) if the Plan is discontinued, the Account of each Participant
shall be fully vested and shall be distributed to the
Participant in accordance with Section 12.
15.02 FORFEITURE ACCOUNT
If, after provision for benefits payable to, or in respect of,
Participants on the full termination and wind-up of the Plan, funds
are retained in the Company's Forfeiture Account, the Company's
Forfeiture Account shall be refunded to the Company.
- 30 -
<PAGE> 33
Section 16 - Disclosure
16.01 EXPLANATION OF THE PLAN
The Administrator shall provide each Employee eligible to become a
Participant of the Plan with a written explanation of the terms and
conditions of the Plan and of any amendments to it which are
applicable to him, together with an explanation of his rights and
duties thereunder with reference to the benefits available. Such
information shall be provided to the Employee on or before the later
of:
(1) his date of hire; and
(2) 30 days prior to his eligibility date.
16.02 EXPLANATION OF AMENDMENTS
The Administrator shall provide each Participant with an explanation
of any amendment to the Plan applicable to him together with an
explanation of his rights and duties thereunder with reference to the
benefits available. Such information shall be provided to the
Participant within 90 days after registration of the amendment.
16.03 ANNUAL STATEMENT
The Administrator shall provide each Participant with an annual
statement containing prescribed information within 180 days of the end
of each fiscal year.
16.04 STATEMENT ON TERMINATION
The Administrator shall provide a former Participant with a written
statement of his entitlements, rights and obligations within 90 days
after his termination of employment, and upon the written request of
former Participant, but not more frequently than annually, the same
information but updated.
- 31 -
<PAGE> 34
16.05 STATEMENT ON RETIREMENT
The Administrator shall provide a Participant or former Participant,
but not more frequently than annually, who is about to commence his
pension with a written statement of his entitlements, rights and
obligations within 90 days after receiving a completed application in
the form required by the Administrator for commencement of pension.
16.06 STATEMENT ON DEATH
The Administrator shall provide a surviving Spouse, Beneficiary or
personal representative of a deceased Participant or former
Participant who is entitled to a benefit with a written statement of
the entitlements, rights and obligations within 90 days after proof of
death is provided to the Administrator.
16.07 RELEVANT DATA
The Administrator shall provide any person entitled to a statement in
accordance with this Section with the data used to calculate any
applicable prescribed benefit within 30 days after receiving a written
request for such data.
16.08 NOTICE OF INTENT TO WIND UP THE PLAN
The Administrator shall provide each Participant or former Participant
where it is intended to terminate or windup the Plan, written notice
of such intention at least 60 days before the proposed windup date.
In the event that the decision is made to terminate or windup the Plan
within 60 days, notice is to be provided immediately after such
decision is made.
16.09 STATEMENT ON WIND UP
In the event that the Plan is terminated or wound-up, the
Administrator shall provide each Participant with a written statement
of his entitlements, rights and obligations together with any other
prescribed information, within 30 days after the approval of the
Superintendent of Pensions of the windup report.
16.10 DISCLOSURE TO PARTICIPANTS
A copy of the Plan documents and any other information prescribed by
Applicable Legislation may be examined by a Participant at any
reasonable time at the office of the Company.
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<PAGE> 35
Section 17 - General Conditions
17.01 LIMITATION OF RIGHTS GIVEN EMPLOYEES
(1) The adoption and maintenance of the Plan shall not be deemed
to constitute a contract of employment between the Company and
any Employee or Participant.
(2) Nothing contained herein shall be deemed to give to any
Employee the right to be retained in the service of the
Company or to interfere with the right of the Company to
terminate the employment of any Employee.
17.02 OBLIGATION OF COMPANY AND FUND
All benefits payable under the Plan shall be provided for solely from
the Fund and persons entitled to benefits hereunder shall look only to
the assets of the Fund for payment. The Company's obligations
hereunder are limited to the obligations expressly set forth herein.
17.03 PAYMENTS CANNOT BE ASSIGNED
All benefits to which a person is, or may become, entitled pursuant to
the Plan are for the support and maintenance of such person and may
not in any manner, in whole or in part, be assigned, alienated,
anticipated, sold, transferred, pledged, hypothecated, encumbered,
charged, given as security or surrendered and except as otherwise
required by law, shall not be subject to attachment or otherwise by,
or on behalf of, the creditors of such person.
17.04 BREAKDOWN OF SPOUSAL RELATIONSHIP
Subject to the Employment Pension Plans Act, the entitlement of a
Member to receive a benefit under this Plan is subject to entitlements
arising under a matrimonial property order, within the meaning of the
Matrimonial Property Act, issued by a court of competent jurisdiction.
The aggregate of payments made from the Plan to a Member of his Spouse
or former Spouse pursuant to such an order shall not exceed the amount
which would have been payable under the Plan to the Member in the
absence of such an order.
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<PAGE> 36
17.05 SOURCE OF BENEFIT PAYMENTS
The Company reserves the right to provide for payment of benefits
referred to in this Plan directly from the Fund in the case of lump
sum payments only. In all other cases, monies will be transferred
from the Fund to a Canadian trust company, to a life insurance company
licensed to transact annuity business in Canada, or to another pension
plan fund recognized as such under the Employment Pension Plans Act,
for the benefit of the Participant, Spouse or Beneficiary as the case
may be. Such transfer shall serve as a full discharge of the
obligations of the Company, the Fund and the Plan.
17.06 PAYMENT OF BENEFITS
Where a Participant or the Beneficiary of a Participant is entitled to
receive a lump sum payment under the Plan, the Company shall cause the
payment to be made within sixty (60) days of receipt by the Company of
the election forms prescribed under the Plan.
17.07 WITHDRAWAL FROM PLAN
A Participant in the Plan cannot withdraw from the Plan while he
remains in the employment of the Company.
17.08 PAYMENT OF PENSION ON BEHALF OF PARTICIPANT
If a person entitled to receive retirement benefits hereunder has been
adjudged or declared mentally incompetent, the Company shall, upon
receipt of lawful notice in respect thereof, thereafter pay the
retirement benefits to which such person is entitled to his legal
representative specified in such notice. Any payments made by the
Company pursuant to this Section 17.08 shall operate as a complete
release and discharge on the part of the Fund and the Company with
respect to such payments and the Company shall be under no liability
or obligation to follow the application of the funds so paid.
- 34 -
<PAGE> 37
17.09 PROOF OF AGE
Proof, acceptable to the Company, of the date of birth of the any
person to whom a life annuity is payable under this Plan must be
submitted to the Company before benefits are payable to such person.
17.10 COST OF THE PLAN
All fees or charges attributable to the operation of the Plan shall be
paid by the Company to the extent such are not paid out of the
Company's Forfeiture Account.
17.11 JURISDICTION
The Plan shall be construed and administered in accordance with the
law of the Province of Alberta.
- 35 -
<PAGE> 38
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by
its duly authorized officers this day of , A.D.
1994.
SEAGULL ENERGY CANADA LTD.
- 36 -
<PAGE> 1
EXHIBIT 10.31
SEAGULL ENERGY CANADA LTD.
CAPITAL ACCUMULATION PLAN
JANUARY 1994
<PAGE> 2
Table Of Contents
<TABLE>
<S> <C>
Section 1 - Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 - Purpose Of The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3 - Eligibility And Participation . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4 - Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5 - Investment Of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6 - Sale And Transfer Of Investments . . . . . . . . . . . . . . . . . . . . 12
Section 7 - Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8 - Designation Of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9 - Administration Of The Plan . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10 - General Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
Section 1 - Interpretations
1.01 TERMS
For the purposes of this Plan, including this Section 1, the
expressions set out below shall have the respective meaning
attributed thereto.
1.02 BENEFICIARY means the person or persons, designated by the Participant
as the Beneficiary pursuant to Section 8.01.
1.03 BOARD OF DIRECTORS means the Board of Directors of Seagull Energy
Canada Ltd.
1.04 COMMITTEE means a committee appointed by the Company to provide the
Trustee with assistance in respect of interpretations and elections
assigned under the Plan to the Company.
1.05 CONTINUOUS SERVICE means the period of uninterrupted active service by
a Participant from the Participant's most recent date of employment
with the Company and rendered to the date of his termination of his
service with the Company, death, or retirement, whichever is the
earliest. Continuous service shall include
(a) any educational leave of absence of an Employee from
his duties which does not exceed two (2) years and is
granted with the consent of the Company;
(b) any absence of an Employee due to maternity leave,
sick or accident leave which cause is certified by a
medical practitioner as being a disabling illness or
injury, or such other leave which does not exceed two (2)
years and is recognized by the Company;
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<PAGE> 4
(c) service with any predecessor company, provided the
Company recognizes such service for purposes of the Plan;
and
(d) any period of temporary absence or lay-off by the
Company, provided such temporary absence or lay-off does
not exceed a continuous twenty six (26) week period.
Service occurring before a break in Continuous Service shall not
constitute Continuous Service.
1.06 COMPANY means Seagull Energy Canada Ltd. and any affiliated company
designated by Seagull Energy Canada Ltd. to be a participating
employer in the Plan; provided that any reference herein to any
action to be undertaken or discretion to be exercised by the Company
hereunder means Seagull Energy Canada Ltd. acting through its Board
of Directors or any person or group of persons authorized to do so,
either directly or indirectly, by the Board of Directors.
1.07 EFFECTIVE DATE means April 1, 1994.
1.08 EMPLOYEE means any person employed by the Company on a part-time or
full-time basis, but does not include anyone employed on a contract
or term basis.
1.09 EMPLOYEE ACCOUNT means the account to which the Participant's
contributions pursuant to Sections 4.01 and 4.04 are made, including
the Investment Earnings thereon.
1.10 EMPLOYER RRSP ACCOUNT means the account to which the Company's
contributions pursuant to Section 4.03 herein are made on behalf of a
Participant, including the Investment Earnings thereon.
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<PAGE> 5
1.11 EMPLOYER STOCK ACCOUNT means the account to which the Company's
contributions pursuant to Section 4.02 herein are made on behalf of a
Participant, including the Investment Earnings thereon.
1.12 INCOME TAX ACT means the Income Tax Act, S.C. 1970-71-72, c. 63 and
the Regulations thereunder.
1.13 INVESTMENT EARNINGS means the interest, dividends and realized capital
gains or capital losses attributable to investments under the Plan,
as determined by the Trustee.
1.14 INVESTMENT OPTIONS means investment funds and accounts selected by the
Company for the Plan, including as applicable Seagull Common Stock as
defined in Section 4.02 herein, and to which contributions under the
Plan may be directed.
1.15 PARTICIPANT means any Employee who fulfils the eligibility
requirements set forth in Section 3 hereof and whose application for
participation has been accepted and recorded by the Company. A
Participant shall include a former Employee who continues to be
entitled to benefits or rights under the Plan.
1.16 PLAN means the plan set forth herein and as amended from time to time,
which shall be known as the "Seagull Energy Canada Ltd. Capital
Accumulation Plan".
1.17 PLAN YEAR means the calendar year.
1.18 REGULAR GROSS EARNINGS means the basic monthly remuneration received
by the Participant, as determined by the Company.
1.19 REGISTERED RETIREMENT SAVINGS PLAN or RRSP means a Registered
Retirement Savings Plan as defined under the Income Tax Act.
1.20 TRUST AGREEMENT means the agreement entered into between the Company
and the Trustee establishing the Trust Fund for the purposes of the
Plan.
1.21 TRUST FUND means the aggregate of the accounts to which contributions
may be made by the Participants and by the Company in accordance with
the terms of the Plan.
1.22 TRUSTEE means the trust company appointed by the Company to act as
custodian and trustee of the Investment Options and Trust Fund
including any successor trustee or trustees.
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<PAGE> 6
1.23 HEADINGS. Section headings are convenient references only and shall
not be deemed to be a part of the substance of this instrument or in
any way to enlarge or limit the contents of any Section.
1.24 NUMBER AND GENDER. In this Plan words importing the singular include
the plural and vice versa; words importing the masculine gender
include the feminine and vice versa; and words importing persons
include firms or corporations and vice versa.
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<PAGE> 7
Section 2 - Purpose Of The Plan
2.01 ESTABLISHING PLAN
The purpose of the Plan is to assist Employees in their savings
goals by providing payroll deductions for Employees who enroll in the
Plan. The Plan has been incorporated to comply with Section 144 of
the Income Tax Act and the provisions thereunder.
Participant contributions shall not be tax deductible, unless
they are made to one of the Investment Options which qualify under
the Income Tax Act as a Registered Retirement Savings Plan.
Company contributions made on behalf of a Participant shall be
considered remuneration of the Participant for the taxation year in
which the contribution is deposited with the Trustee and shall be
reported by the Company as income, unless provided otherwise under
the Income Tax Act.
Unless Investment Earnings are realized under an Investment
Option which is a Registered Retirement Savings Plan, Investment
Earnings will be subject to tax for the year in which such earnings
were realized and shall be reported as such by the Trustee, subject
to the Income Tax Act.
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<PAGE> 8
Section 3 - Eligibility And Participation
3.01 ELIGIBILITY
An Employee may, on a voluntary basis, become a Participant as of
the first day of the month coincident with or next following his
employment or the first day of any month thereafter.
3.02 ENROLLMENT
To become a Participant, an Employee must complete and file with
the Company application forms which shall
(a) authorize the Company to deduct from his Regular Gross
Earnings the amount of contributions designated by the
Participant pursuant to Section 4.01 and 4.04;
(b) designate the portion of the contributions made by the
Participant which shall be directed to each Investment
Option; and
(c) if the Participant elects to participate in a
Registered Retirement Savings Plan option, complete an
enrollment form as prescribed by the Trustee.
3.03 WAIVING OF ELIGIBILITY REQUIREMENTS
The provisions of Section 3.01 hereof notwithstanding, at its
sole discretion, the Company may, in writing, waive or reduce the
eligibility period otherwise applicable.
3.04 RE-EMPLOYMENT OF EMPLOYEE
If an Employee terminates his service with the Company and is
later re-employed, for all purposes of the Plan he shall be regarded
as a new employee unless otherwise directed in writing by the
Company.
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<PAGE> 9
Section 4 - Contributions
4.01 PARTICIPANT CONTRIBUTIONS
Commencing from the Effective Date, a Participant may make
contributions to the Plan of any whole percentage from a minimum of
0% to a maximum of 5% of the Participant's Regular Gross Earnings.
Such contributions shall be made monthly, shall be by payroll
deduction only and shall be made to the Participant's Employee
Account.
4.02 COMPANY MATCHING CONTRIBUTIONS
The Company shall each month contribute out of profits to the
Employer Stock Account of each Participant a matching amount equal to
that contributed by the Participant pursuant to Section 4.01 to a
maximum of 5% of the Participant's Regular Gross Earnings.
Notwithstanding the foregoing, if, with respect to any fiscal
year, the parent company of the Company (being Seagull Energy
Corporation of Houston, Texas) fails to have net earnings
attributable to Seagull Common Stock of at least $1.00 (U.S.) as
determined in accordance with United States generally accepted
accounting principles and reflected in the audited consolidated
financial statements relating to the Seagull Common Stock for such
fiscal year, the Company shall not make matching contributions to the
Plan with respect to the next calendar year that commences after the
conclusion of such fiscal year. With respect to any given fiscal
year, the term "Seagull Common Stock" shall mean the class or series
of common stock that has the greatest market capitalization at the
end of such fiscal year.
4.03 COMPANY RRSP CONTRIBUTIONS
The Company shall each month contribute to the Employer RRSP
Account of each Participant an amount of 4% of the Participant's
Regular Gross Earnings. In lieu thereof, the Participant may request
that such contribution on his behalf be paid to him in cash, less
applicable withholding tax.
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<PAGE> 10
4.04 VOLUNTARY PARTICIPANT CONTRIBUTIONS
Commencing from the Effective Date, a Participant may make
additional contributions to the Plan of any whole percentage of the
Participant's Regular Gross Earnings. Such contributions shall be
made monthly, shall be by payroll deduction only and shall be made to
the Participant's Employee Account. There shall be no Company
contributions pursuant to Section 4.02 with respect to such
additional contributions.
4.05 VESTING OF COMPANY CONTRIBUTIONS
The Company's contributions made on behalf of a Participant shall
be 100% vested in the Participant.
4.06 CHANGES IN PARTICIPANT'S CONTRIBUTION RATE
By giving notice to the Company fifteen (15) days prior to the
effective date of such change, a Participant may change his
contribution rate effective any first day of the month. Changes by
the Participant may be made not more frequently than twice each
calendar year.
4.07 SUSPENSION OF CONTRIBUTIONS
By giving fifteen (15) days written notice to the Company, a
Participant may elect to suspend his contributions to the Plan and
such suspension shall be effective the first day of the month next
following acceptance by the Company of such notification. A
Participant who elects to suspend his contributions shall be
suspended from participating in the Plan for a minimum of six (6)
calendar months.
A Participant shall not be entitled to accumulate or carry
forward for later payment the amounts he would otherwise have
contributed had he not elected to suspend his contributions.
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<PAGE> 11
If the period of suspension exceeds twenty-four (24) months, the
Trustee may be so advised and all holdings in the accounts of the
Participant shall be forwarded to the Participant in full
satisfaction of the Participant's entitlement under the Plan.
4.08 RESUMPTION OF CONTRIBUTIONS
By giving notice in writing, a Participant who has suspended his
contributions to the Plan under Section 4.06 may resume making
contributions to the Plan commencing the first day of the month next
following fifteen (15) days notice. An employee wishing to resume
contributions shall complete and file an enrollment form as provided
in Section 3.02.
4.09 ALLOCATIONS MADE MONTHLY
All amounts deposited with the Trustee and all Investment
Earnings shall be allocated to the Employee Account and the Employer
Stock Account and Employer RRSP Account, as applicable, of the
Participant. Such allocation shall be made by the Trustee monthly
and in any case not later than the end of the year in which such
amounts are received by the Trustee.
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<PAGE> 12
Section 5 - Investment Of Accounts
5.01 EMPLOYEE ACCOUNT
The Participant contributions pursuant to Sections 4.01 and 4.04
will be deposited with the Trustee and invested in the Investment
Options as selected by each Participant. The Trustee shall maintain
records of the amounts invested for each Participant and for the
Investment Earnings attributable thereto.
5.02 EMPLOYER STOCK ACCOUNT
The Company matching contributions pursuant to Section 4.02 will
be deposited with the Trustee and invested in Seagull Common Stock
(as defined in Section 4.02 herein). The Trustee shall maintain
records of the amounts invested for each Participant and the
Investment Earnings attributable thereto.
5.03 EMPLOYER RRSP ACCOUNT
The Company RRSP contributions pursuant to Section 4.03 shall be
deposited with the Trustee and invested in the Investment Options
selected by the Participant, provided such qualify for RRSP's. The
Trustee shall maintain records of the amounts invested for each
Participant and the Investment Earnings attributable thereto.
5.04 APPLICATION OF INVESTMENT EARNINGS
All Investment Earnings shall be reinvested by the Trustee in the
Investment Option to which the Investment Earnings are attributable.
All dividends on investments in Seagull Common Stock shall be
accumulated by the Trustee and applied to purchase further
investments in Seagull Common Stock.
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<PAGE> 13
5.05 CHANGES IN INVESTMENT INSTRUCTIONS
A Participant may, effective any first day of the month, change
the allocation of his contributions which shall henceforth be
directed to any of the Investment Options. A Participant who wishes
to change his Investment Options pursuant to this paragraph shall
give notice in writing to the Company at least fifteen (15) days
prior to the effective date of the change. Such request for change
may be made not more frequently than twice each calendar year.
5.06 ISSUANCE OF QUARTERLY STATEMENT
The Trustee shall, within sixty (60) days following the end of
each quarter of each year, provide each Participant with a statement
setting forth the details of his Employee Account and his Employer
Stock Account and Employer RRSP Account. Further account statements
shall be provided by the Trustee as requested by the Company.
5.07 SECURITIES ARE FULLY PAID
All shares or other securities acquired by or for a Participant
shall be fully paid and non-assessable when issued.
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<PAGE> 14
Section 6 - Sale And Transfer Of Investments
6.01 SALE AND TRANSFER OF EMPLOYEE ACCOUNT AND EMPLOYER RRSP ACCOUNT
INVESTMENTS
A Participant may authorize the sale of one Investment Option
from his Employee Account or his Employer RRSP Account and the
transfer of proceeds therefrom to another Investment Option. Such
transfer shall occur on the date established by the Trustee. Such
authorization may be submitted not more frequently than twice each
calendar year.
6.02 SALE AND TRANSFER OF EMPLOYER STOCK ACCOUNT INVESTMENTS
Company investments are restricted to Seagull Common Stock (as
defined in Section 4.02 herein) and sale and transfer of the Employer
Stock Account balance is not permitted.
6.03 TIMELY NOTICE OF SALE AND TRANSFER
A Participant who wishes to authorize the sale of any Investment
Option from his Employee Account or his Employer RRSP Account
pursuant to the preceding section shall give notice in writing to the
Company at least fifteen (15) days prior to the date on which such
Investment Option is to be sold.
6.04 LIMITATION TO NOTICE GIVEN
Notice pursuant to the preceding paragraph authorizing the sale
of any Investment Option shall not be deemed to constitute notice
pursuant to Section 5 that the percentage of future contributions are
to be directed to that Investment Option to which the assets are
being transferred.
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<PAGE> 15
Section 7 - Withdrawals
7.01 EMPLOYER STOCK ACCOUNT WITHDRAWALS DURING EMPLOYMENT
Upon submission of written notice to the Company, a Participant
may, under specific circumstances, apply to withdraw all or any
portion of his Employer Stock Account.
In the event that a Participant withdraws funds from his Employer
Stock Account, the Company matching contributions pursuant to Section
4.02 herein with respect to such Participant shall be suspended for a
period of six months following the date of such withdrawal unless the
Participant provides evidence to the Company that such withdrawal was
for:
(a) expenses for medical or dental care previously
incurred by the Participant, the Participant's spouse,
children, or dependents or necessary for those persons to
obtain medical or dental care that is not reimbursed or
reimbursable by public or private insurance;
(b) costs directly related to the purchase of a principal
residence of the Participant;
(c) payments towards the mortgage of the Participant's
principal residence;
(d) payment of tuition and related educational fees for
the next twelve months of post-secondary education for the
Participant or the Participant's spouse, children or
dependents;
(e) payment of funeral expenses of the Participant's
spouse, children or dependents; or
(f) payment of child support, adoption fees, divorce
settlements or tax assessments.
7.02 EMPLOYEE ACCOUNT OR EMPLOYER RRSP ACCOUNT WITHDRAWALS DURING
EMPLOYMENT
Upon submission of written notice to the Company, a Participant
may withdraw all or any portion of his Employee Account or of his
Employer RRSP Account.
7.03 RESTRICTIONS ON WITHDRAWALS DURING EMPLOYMENT
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<PAGE> 16
Requests for withdrawal pursuant to Sections 7.01 and 7.02 above
may be made not more frequently than twice each calendar year.
Contributions made in any given calendar year may not be withdrawn
until January 1 of the following calendar year at the earliest.
7.04 WITHDRAWALS UPON TERMINATION
A Participant whose employment with the Company has ceased other
than by reason of death, disability or retirement shall, within
ninety (90) days of his date of termination, be required to withdraw
all of his Employee Account and his Employer Stock Account and
Employer RRSP Account.
7.05 WITHDRAWALS UPON DEATH
In the event of the death of a Participant, the entire value of
his Employee Account and his Employer Stock Account and Employer RRSP
Account shall be payable to his Beneficiary.
7.06 WITHDRAWALS UPON DISABILITY
Should a Participant be in receipt of benefits from any long term
disability plan sponsored by the Company, he shall be entitled during
such period of disability to receive all or a portion of his Employee
Account and his Employer Stock Account and Employer RRSP Account.
Should he elect to withdraw less than all his entitled value, he
shall continue to participate in the allocation of Investment
Earnings as provided in Section 5.04.
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<PAGE> 17
7.07 WITHDRAWAL UPON RETIREMENT
In the event the Participant retires, the value of the
Participant's holdings shall be determined, within ninety (90) days
of his retirement, by the Trustee through a valuation of the
Participant's Employee Account and his Employer Stock Account and
Employer RRSP Account.
7.08 OPTIONS AVAILABLE
A Participant or Beneficiary may elect to receive the proceeds to
which he has been deemed entitled pursuant to this Section 7:
(a) in cash in one lump sum; or
(b) as a transfer to a Registered Retirement Savings Plan
account of the Participant, provided the amounts so
transferred had been invested in an Investment Option
which qualifies as a Registered Retirement Savings Plan.
Settlement in a manner herein provided shall be made within
ninety (90) days of such notification of withdrawal and shall serve
as a full discharge of the obligations of the Company and the Trustee
under the Plan.
Should a Participant or Beneficiary fail to make an election
within the prescribed period the participant or beneficiary, as the
case may be, shall receive the proceeds in cash in one lump sum.
7.09 DATE OF WITHDRAWALS
The date of the withdrawal of the value of the accounts shall be
the next date of valuation following receipt by the Trustee of
notice. The manner of notification shall be as prescribed by the
Company.
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<PAGE> 18
7.10 VALUE OF INVESTMENT OPTIONS ON WITHDRAWAL
The value of each Investment Option being disposed of on behalf
of a Participant in the event of a partial or total withdrawal shall
be its value on the date of the withdrawal, as established by the
Trustee.
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<PAGE> 19
Section 8 - Designation Of Beneficiary
8.01 DESIGNATION AND CHANGE OF BENEFICIARY
A Participant may designate a Beneficiary to receive the benefits
payable under the Plan in the event of the Participant's death, and
may, by written notice given to the Company during such Participant's
lifetime, alter or revoke such designation from time to time subject
always to the provisions of any law or laws governing the designation
of beneficiaries which may then apply to such Participant. Any such
written notice shall be in such form and executed in such manner as
the Company may require.
8.02 PROVISION FOR PAYMENT IN THE EVENT OF DEATH OF BENEFICIARY
If at the death of a Participant, the person designated as the
Beneficiary shall not then be living, such amount as may then be
payable shall be paid to the estate of the Participant.
8.03 RELIANCE ON DOCUMENTS
The Company and the Trustee shall be entitled to rely solely upon
the designation of Beneficiary made pursuant to this Section 8
without further responsibility to enquire into any claim, possible
claim or entitlement of any other person. The Company may require
the execution and delivery of such documents, papers and receipts as
it deems necessary or desirable in order to effect payment of
benefits to the Beneficiary hereunder.
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<PAGE> 20
Section 9 - Administration Of The Plan
9.01 RESPONSIBILITY FOR PLAN
Administration of the Plan is the responsibility of the Company
and all questions regarding the provisions of the Plan and
application of the terms and conditions of the Plan shall be decided
by the Company.
The administrative responsibilities retained hereto to the
Company may, at the discretion of the Company, be assigned to the
Committee.
9.02 POWERS OF TRUSTEE
The Trustee shall be responsible for, but not restricted to,
asset valuation, accounting for the assets of the Plan, income
determination and calculation of realized capital gains or losses.
9.03 INVESTMENTS
Investments for the Plan shall be in securities which are
Approved Securities within the meaning ascribed thereto under the
Securities Act (Alberta).
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<PAGE> 21
Section 10 - General Conditions
10.01 COMPANY'S RIGHT TO AMEND OR TERMINATE PLAN
The Company retains the right to amend or terminate the Plan in
whole or in part, at any time, and in such manner and to such extent
as it may deem advisable.
No amendment shall have the effect of reducing the value of any
Participant's, Beneficiary's, or other survivor's then existing
interest in the Plan or accounts thereunder, nor shall any amendment
be made without the approval of the Trustee.
10.02 LIMITATION OF RIGHTS GIVEN EMPLOYEES
(a) The adoption and maintenance of the Plan shall not be
deemed to constitute a contract of employment between the
Company and any Employee or Participant.
(b) Nothing contained herein shall be deemed to give to an
Employee the right to be retained in the service of the
Company or to interfere with the right of the Company to
terminate the employment of an Employee at any time.
10.03 TERMINATION OF PLAN
Should the Plan be discontinued by the Company, all contributions
on deposit for the Participants and the value of the Employee
Accounts and Employer Stock Account and Employer RRSP Accounts being
held in trust shall be paid to the Participant pursuant to the
options available under Section 7.08. Such payment shall be made by
the Trustee no later than ninety (90) days following termination of
the Plan.
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<PAGE> 22
10.04 OBLIGATION OF COMPANY AND FUND
All benefits payable under the Plan shall be paid, or provided
for, solely from the Trust Fund and persons entitled to benefits
hereunder shall look only to the assets of the Trust Fund for
payment. The Company's obligations hereunder are limited to the
obligations expressly set forth herein.
10.05 INVESTMENT INCOME REPORTING
The Trustee shall report to each Participant the Investment
Earnings which are subject to income tax for each Participant on a
quarterly basis.
10.06 COPY OF THE PLAN
The Company shall furnish an explanation in writing to each
Participant of the terms and conditions of the Plan and amendments
thereto applicable to him, together with an explanation of the rights
and duties of the said Participant with reference to the benefits
available to him under the terms and conditions of the Plan. In the
event of conflict between such explanation in writing and this Plan,
the terms of this Plan shall prevail.
10.07 PREVAILING DOCUMENTS
In the event of a conflict between any provision contained in the
Plan and any provision contained in the Trust Agreement issued by the
Trustee, the provisions of the Trust Agreement shall prevail.
10.08 JURISDICTION
The Plan shall be construed and administered in accordance with
the law of the Province of Alberta.
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<PAGE> 23
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by
its duly authorized officers this day of , A.D.
1994.
SEAGULL ENERGY CANADA LTD.
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<PAGE> 1
EXHIBIT 10.32
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made as of the 17th day of March, 1995 between
SEAGULL ENERGY CORPORATION, a Texas corporation (the "COMPANY"), and BARRY J.
GALT ("EMPLOYEE").
For some time Employee has been serving as a key executive officer of
the Company. In recognition of his past service and in order to encourage
Employee to remain with the Company and devote his best efforts to its affairs,
thereby advancing the interests of the Company and its shareholders, the
Company and Employee agree as follows:
1. ISSUANCE OF STOCK. Upon the execution of this Agreement, the
Company shall issue and/or dispose of 6,000 shares of the common stock of the
Company ("Stock") to Employee. The shares of Stock issued and/or disposed of
to Employee under this Agreement shall be subject to all the terms, conditions
and restrictions set forth in this Agreement.
2. FORFEITURE RESTRICTIONS. The Stock issued and/or disposed of
to Employee pursuant to this Agreement may not be sold, assigned, pledged,
exchanged, hypothecated or otherwise transferred, encumbered or disposed of to
the extent then subject to the Forfeiture Restrictions (as hereinafter
defined), and in the event of termination of Employee's employment with the
Company for any reason (other than as described in (2) and (3) below), Employee
shall, for no consideration, forfeit to the Company all Stock to the extent
then subject to the Forfeiture Restrictions. The prohibition against transfer
and the obligation to forfeit and surrender Stock to the Company upon
termination of employment are herein referred to as "Forfeiture Restrictions,"
and the shares which are then subject to the Forfeiture Restrictions are herein
sometimes referred to as "Restricted Shares." The Forfeiture Restrictions
shall be binding upon and enforceable against any transferee of the Stock. The
Forfeiture Restrictions shall lapse as to all Stock issued to Employee pursuant
to this Agreement on the earlier of (1) the third anniversary of the date of
this Agreement, (2) the date Employee's employment with the Company is
terminated by reason of death, disability under circumstances entitling him to
benefits under the Company's long-term disability plan, or Involuntary
Termination within two years after a Change of Control (as such terms are
defined in the Company's Management Stability Plan), or (3) if Employee's
employment with the Company is terminated for any other reason, the date, if
any, the Compensation Committee of the Board of Directors of the Company (the
"Committee") in its sole discretion waives the Forfeiture Restrictions.
3. CERTIFICATES. A certificate evidencing the Restricted Shares
shall be issued by the Company in Employee's name, pursuant to which Employee
shall have voting rights and shall be entitled to receive dividends and other
distributions (provided, however, that dividends or other distributions paid in
the form of the Company's securities shall be subject to the Forfeiture
Restrictions). The certificate shall bear the following legend:
<PAGE> 2
RESTRICTED STOCK AGREEMENT
The shares evidenced by this certificate have been issued pursuant to
an agreement dated March 17, 1995, a copy of which is attached hereto
and incorporated herein, between the Company and the registered holder
of the shares, and are subject to forfeiture to the Company under
certain circumstances described in such agreement. The sale,
assignment, pledge or other transfer of the shares of stock evidenced
by this certificate is prohibited under the terms and conditions of
such agreement, and such shares may not be sold, assigned, pledged or
otherwise transferred except as provided in such agreement.
The Company may cause the certificate to be delivered upon issuance to the
Secretary of the Company as a depository for safekeeping until the forfeiture
occurs or the Forfeiture Restrictions lapse pursuant to the terms of this
Agreement. Upon request of the Company, Employee shall deliver to the Company
a stock power, endorsed in blank, relating to the Restricted Shares then
subject to the Forfeiture Restrictions. Upon the lapse of the Forfeiture
Restrictions without forfeiture, the Company shall cause a new certificate or
certificates to be issued without legend in the name of Employee in exchange
for the certificate evidencing the Restricted Shares.
4. CONSIDERATION. It is understood that the consideration for
the issuance of Restricted Shares shall be past services of Employee rendered
to the Company prior to the date of issuance of the Restricted Shares, having a
value not less than the par value of such Restricted Shares.
5. WITHHOLDING OF TAX. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in income
to Employee for federal or state income tax purposes, Employee shall deliver to
the Company at the time of such receipt or lapse, as the case may be, such
amount of money or shares of unrestricted Stock as the Company may require to
meet its obligation under applicable tax laws or regulations, and, if Employee
fails to do so, the Company is authorized to withhold from any cash or Stock
remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income.
6. TAX ELECTION. If Employee makes the election authorized by
section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
Employee shall submit to the Company a copy of the statement filed by Employee
to make such election.
7. STATUS OF STOCK. Employee agrees that the Restricted Shares
will not be sold or otherwise disposed of in any manner that would constitute a
violation of any applicable federal or state securities laws. Employee also
agrees (i) that the certificates representing the Restricted Shares may bear
such legend or legends as the Committee deems appropriate in order to ensure
compliance with applicable securities laws, (ii) that the Company may refuse to
register the transfer of the Restricted Shares on the stock transfer records of
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any
Page 2 of 4
<PAGE> 3
RESTRICTED STOCK AGREEMENT
applicable securities law and (iii) that the Company may give related
instructions to its transfer agent, if any, to stop registration of the
transfer of the Restricted Shares.
8. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, any successor corporation
or a parent or subsidiary corporation (as defined in section 424 of the Code)
of the Company or any successor corporation. Any question as to whether and
when there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee, and its determination shall
be final.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding
anything in this Agreement to the contrary, if the lapse of the Forfeiture
Restrictions in Paragraph 2, together with any other payments which Employee
has the right to receive from the Company, would constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code), the lapse of the
Forfeiture Restrictions shall be coordinated with such other payments and,
after taking into account all permitted reductions in cash payments to
Employee, the Forfeiture Restrictions shall lapse with respect to that number
of shares of Stock (a) that would result in the present value of such total
amounts received by Employee from the Company being one dollar ($1.00) less
than three times Employee's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Employee shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) all shares
of Stock, whichever produces the better net after-tax position to Employee
(taking into account any applicable excise tax under Section 4999 of the Code
and any applicable income tax). The Company and Employee shall make the
determination as to the number of shares of Stock as to which the Forfeiture
Restrictions should lapse. Employee shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful,
would require the Company to reduce the number of shares with respect to which
the Forfeiture Restrictions lapse within five days of the receipt of such
claim. The Company shall notify Employee in writing at least five days prior
to the due date of any response required with respect to such claim if it plans
to contest the claim. If the Company decides to contest such claim, Employee
shall cooperate fully with the Company in such action; provided, however, the
Company shall bear and pay directly or indirectly all costs and expenses
(including additional interest and penalties) incurred in connection with such
action. If, as a result of the Company's action with respect to a claim, after
taking into account all permitted increases in cash payments to Employee, the
number shares of Stock as to which the Forfeiture Restrictions lapsed is found
to have been less than the correct number of shares of Stock, the Forfeiture
Restrictions shall immediately lapse with respect to such additional shares of
Stock.
10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
Page 3 of 4
<PAGE> 4
RESTRICTED STOCK AGREEMENT
11. NON-ALIENATION. Employee shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder,
except by will or the laws of descent and distribution.
12. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (a) the right of the Company (or its subsidiaries) to discharge Employee
at will or (b) the terms and conditions of any other agreement between the
Company and Employee except as provided herein.
13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and Employee has executed
this Agreement, all effective as of the date first above written.
SEAGULL ENERGY CORPORATION
By:___________________________
Executive Vice-President and
Chief Operating Officer
____________________________
Barry J. Galt
Page 4 of 4
<PAGE> 1
EXHIBIT 10.33
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made as of the 17th day of March, 1995 between
SEAGULL ENERGY CORPORATION, a Texas corporation (the "COMPANY"), and
___________________ ("EMPLOYEE").
For some time Employee has been serving as a key executive officer of
the Company. In recognition of his past service and in order to encourage
Employee to remain with the Company and devote his best efforts to its affairs,
thereby advancing the interests of the Company and its shareholders, the
Company and Employee agree as follows:
1. ISSUANCE OF STOCK. Upon the execution of this Agreement, the
Company shall issue and/or dispose of ______ shares of the common stock of the
Company ("Stock") to Employee. The shares of Stock issued and/or disposed of
to Employee under this Agreement shall be subject to all the terms, conditions
and restrictions set forth in this Agreement.
2. FORFEITURE RESTRICTIONS. The Stock issued and/or disposed of
to Employee pursuant to this Agreement may not be sold, assigned, pledged,
exchanged, hypothecated or otherwise transferred, encumbered or disposed of to
the extent then subject to the Forfeiture Restrictions (as hereinafter
defined), and in the event of termination of Employee's employment with the
Company for any reason (other than as described in (2) and (3) below), Employee
shall, for no consideration, forfeit to the Company all Stock to the extent
then subject to the Forfeiture Restrictions. The prohibition against transfer
and the obligation to forfeit and surrender Stock to the Company upon
termination of employment are herein referred to as "Forfeiture Restrictions,"
and the shares which are then subject to the Forfeiture Restrictions are herein
sometimes referred to as "Restricted Shares." The Forfeiture Restrictions
shall be binding upon and enforceable against any transferee of the Stock. The
Forfeiture Restrictions shall lapse as to all Stock issued to Employee pursuant
to this Agreement on the earlier of (1) the third anniversary of the date of
this Agreement, (2) the date Employee's employment with the Company is
terminated by reason of death, disability under circumstances entitling him to
benefits under the Company's long-term disability plan, or Involuntary
Termination within two years after a Change of Control (as such terms are
defined in the Severance Agreement effective March 17, 1995 between the Company
and Employee), or (3) if Employee's employment with the Company is terminated
for any other reason, the date, if any, the Compensation Committee of the Board
of Directors of the Company (the "Committee") in its sole discretion waives the
Forfeiture Restrictions.
3. CERTIFICATES. A certificate evidencing the Restricted Shares
shall be issued by the Company in Employee's name, pursuant to which Employee
shall have voting rights and shall be entitled to receive dividends and other
distributions (provided, however, that dividends or other distributions paid in
the form of the Company's securities shall be subject to the Forfeiture
Restrictions). The certificate shall bear the following legend:
<PAGE> 2
RESTRICTED STOCK AGREEMENT
The shares evidenced by this certificate have been issued pursuant to
an agreement dated March 17, 1995, a copy of which is attached hereto
and incorporated herein, between the Company and the registered holder
of the shares, and are subject to forfeiture to the Company under
certain circumstances described in such agreement. The sale,
assignment, pledge or other transfer of the shares of stock evidenced
by this certificate is prohibited under the terms and conditions of
such agreement, and such shares may not be sold, assigned, pledged or
otherwise transferred except as provided in such agreement.
The Company may cause the certificate to be delivered upon issuance to the
Secretary of the Company as a depository for safekeeping until the forfeiture
occurs or the Forfeiture Restrictions lapse pursuant to the terms of this
Agreement. Upon request of the Company, Employee shall deliver to the Company
a stock power, endorsed in blank, relating to the Restricted Shares then
subject to the Forfeiture Restrictions. Upon the lapse of the Forfeiture
Restrictions without forfeiture, the Company shall cause a new certificate or
certificates to be issued without legend in the name of Employee in exchange
for the certificate evidencing the Restricted Shares.
4. CONSIDERATION. It is understood that the consideration for
the issuance of Restricted Shares shall be past services of Employee rendered
to the Company prior to the date of issuance of the Restricted Shares, having a
value not less than the par value of such Restricted Shares.
5. WITHHOLDING OF TAX. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in income
to Employee for federal or state income tax purposes, Employee shall deliver to
the Company at the time of such receipt or lapse, as the case may be, such
amount of money or shares of unrestricted Stock as the Company may require to
meet its obligation under applicable tax laws or regulations, and, if Employee
fails to do so, the Company is authorized to withhold from any cash or Stock
remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income.
6. TAX ELECTION. If Employee makes the election authorized by
section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
Employee shall submit to the Company a copy of the statement filed by Employee
to make such election.
7. STATUS OF STOCK. Employee agrees that the Restricted Shares
will not be sold or otherwise disposed of in any manner that would constitute a
violation of any applicable federal or state securities laws. Employee also
agrees (i) that the certificates representing the Restricted Shares may bear
such legend or legends as the Committee deems appropriate in order to ensure
compliance with applicable securities laws, (ii) that the Company may refuse to
register the transfer of the Restricted Shares on the stock transfer records of
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any
Page 2 of 4
<PAGE> 3
RESTRICTED STOCK AGREEMENT
applicable securities law and (iii) that the Company may give related
instructions to its transfer agent, if any, to stop registration of the
transfer of the Restricted Shares.
8. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, any successor corporation
or a parent or subsidiary corporation (as defined in section 424 of the Code)
of the Company or any successor corporation. Any question as to whether and
when there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee, and its determination shall
be final.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding
anything in this Agreement to the contrary, if the lapse of the Forfeiture
Restrictions in Paragraph 2, together with any other payments which Employee
has the right to receive from the Company, would constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code), the lapse of the
Forfeiture Restrictions shall be coordinated with such other payments and,
after taking into account all permitted reductions in cash payments to
Employee, the Forfeiture Restrictions shall lapse with respect to that number
of shares of Stock (a) that would result in the present value of such total
amounts received by Employee from the Company being one dollar ($1.00) less
than three times Employee's base amount (as defined in Section 280G of the
Code) and so that no portion of such amounts received by Employee shall be
subject to the excise tax imposed by Section 4999 of the Code or (b) all shares
of Stock, whichever produces the better net after-tax position to Employee
(taking into account any applicable excise tax under Section 4999 of the Code
and any applicable income tax). The Company and Employee shall make the
determination as to the number of shares of Stock as to which the Forfeiture
Restrictions should lapse. Employee shall notify the Company immediately in
writing of any claim by the Internal Revenue Service which, if successful,
would require the Company to reduce the number of shares with respect to which
the Forfeiture Restrictions lapse within five days of the receipt of such
claim. The Company shall notify Employee in writing at least five days prior
to the due date of any response required with respect to such claim if it plans
to contest the claim. If the Company decides to contest such claim, Employee
shall cooperate fully with the Company in such action; provided, however, the
Company shall bear and pay directly or indirectly all costs and expenses
(including additional interest and penalties) incurred in connection with such
action. If, as a result of the Company's action with respect to a claim, after
taking into account all permitted increases in cash payments to Employee, the
number shares of Stock as to which the Forfeiture Restrictions lapsed is found
to have been less than the correct number of shares of Stock, the Forfeiture
Restrictions shall immediately lapse with respect to such additional shares of
Stock.
10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
Page 3 of 4
<PAGE> 4
RESTRICTED STOCK AGREEMENT
11. NON-ALIENATION. Employee shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder,
except by will or the laws of descent and distribution.
12. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be
deemed to constitute a contract of employment, nor shall any provision hereof
affect (a) the right of the Company (or its subsidiaries) to discharge Employee
at will or (b) the terms and conditions of any other agreement between the
Company and Employee except as provided herein.
13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and Employee has executed
this Agreement, all effective as of the date first above written.
SEAGULL ENERGY CORPORATION
By:___________________________
Chairman, President and
Chief Executive Officer
___________________________
Page 4 of 4
<PAGE> 1
EXHIBIT 10.34
SEVERANCE AGREEMENT
AGREEMENT between SEAGULL ENERGY CORPORATION, a Texas corporation (the
"COMPANY"), and ___________________________________________ ("EXECUTIVE"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel
and, accordingly, the Board of Directors of the Company (the "BOARD") has
approved the Company entering into a severance agreement with Executive in
order to encourage his continued service to the Company; and
WHEREAS, Executive is prepared to commit such services in return for
specific arrangements with respect to severance compensation and other
benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:
1. DEFINITIONS.
(a) "CHANGE IN DUTIES" shall mean the occurrence, within
two years after the date upon which a Change of Control occurs, of any one or
more of the following:
(i) A significant reduction in the duties of
Executive from those applicable to him immediately prior to the date
on which a Change of Control occurs;
(ii) A reduction in Executive's annual salary or
target opportunity under any applicable bonus or incentive
compensation plan from that provided to him immediately prior to the
date on which a Change of Control occurs;
(iii) Receipt of employee benefits (including but
not limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by
Executive that are materially inconsistent with the employee benefits
and perquisites provided by the Company to executives with comparable
duties; or
(iv) A change in the location of Executive's
principal place of employment by the Company by more than 50 miles
from the location where he was principally employed immediately prior
to the date on which a Change of Control occurs.
(b) "CHANGE OF CONTROL" means the occurrence of either of
the following events:
(i) The Company (A) shall not be the surviving
entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an
<PAGE> 2
entity other than a previously wholly-owned subsidiary of the Company)
or (B) is to be dissolved and liquidated, and as a result of or in
connection such transaction, the persons who were directors of the
Company before such transaction shall cease to constitute a majority
of the Board; or
(ii) Any person or entity, including a "GROUP" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the outstanding
shares of the Company's voting stock (based upon voting power), and as
a result of or in connection with such transaction, the persons who
were directors of the Company before such transaction shall cease to
constitute a majority of the Board.
(c) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "COMPENSATION" shall mean the greater of:
(i) Executive's annual salary plus his Targeted
EIP Award immediately prior to the date on which a Change of Control
occurs, or
(ii) Executive's annual salary plus his Targeted
EIP Award at the time of his Involuntary Termination.
(e) "EIP" shall mean the Seagull Energy Corporation
Executive Incentive Plan or any successor thereto.
(f) "INVOLUNTARY TERMINATION" shall mean any termination
of Executive's employment with the Company which:
(i) does not result from a resignation by Executive
(other than a resignation pursuant to clause (ii) of this subparagraph
(f)); or
(ii) results from a resignation by Executive on or
before the date which is sixty days after the date upon which
Executive receives notice of a Change in Duties;
provided, however, the term "INVOLUNTARY TERMINATION" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company's long-term
disability plan, or Retirement.
(g) "OBJECTIVE EIP AWARD" shall mean, with respect to
Executive, the amount, if any, earned under the objective criterion of the EIP
in effect for the calendar year preceding such Employee's Involuntary
Termination.
(h) "RETIREMENT" shall mean Executive's resignation on or
after the date he reaches age sixty-five.
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<PAGE> 3
(i) "SEVERANCE AMOUNT" shall mean an amount equal to 2.99
times Executive's Compensation.
(j) "TARGETED EIP AWARD" shall mean Executive's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or for the last preceding year in which
an EIP was in effect, expressed as a dollar amount based on such Executive's
annual salary for such year.
(k) "TERMINATION FOR CAUSE" shall mean termination of
Executive's employment by the Company (or its subsidiaries) by reason of
Executive's (i) gross negligence in the performance of his duties, (ii) willful
and continued failure to perform his duties, (iii) willful engagement in
conduct which is materially injurious to the Company or its subsidiaries
(monetarily or otherwise) or (iv) conviction of a felony or a misdemeanor
involving moral turpitude.
(l) "WELFARE BENEFIT COVERAGES" shall mean the medical,
dental, life insurance, accidental death and dismemberment and long-term
disability coverages provided by the Company to its active employees.
2. SERVICES. Executive agrees that he will render services to
the Company (as well as any subsidiary thereof or successor thereto) during the
period of his employment to the best of his ability and in a prudent and
businesslike manner and that he will devote substantially the same time,
efforts and dedication to his duties as heretofore devoted.
3. SEVERANCE BENEFITS. If Executive's employment by the Company
or any subsidiary thereof or successor thereto shall be subject to an
Involuntary Termination which occurs within two years after the date upon which
a Change of Control occurs, then Executive shall be entitled to receive, as
additional compensation for services rendered to the Company (including its
subsidiaries), the following severance benefits:
(a) A lump sum cash payment in an amount equal to
Executive's Severance Amount.
(b) A lump sum cash payment in an amount equal to the
remaining portion of any award to Executive under any prior years' EIP.
Further, if Executive's Involuntary Termination occurs on or after the date an
award has been earned under the EIP, but prior to the date such award is paid,
Executive shall receive an additional lump sum cash payment in an amount equal
to two times his Objective EIP Award.
(c) Executive shall be entitled to continue the Welfare
Benefit Coverages for himself and, where applicable, his eligible dependents
following his Involuntary Termination for up to thirty-six months, as long as
Executive continues either to pay the premiums paid by active employees of the
Company for such coverages or to pay the actual (nonsubsidized) cost of such
coverages for which the Company does not subsidize for active employees. Such
benefit rights shall apply only to those Welfare Benefit Coverages which the
Company has in effect from time to time for active employees, and the
applicable
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<PAGE> 4
payments shall adjust as premiums for active employees of the Company or actual
costs, whichever is applicable, change. Welfare Benefit Coverage(s) shall
immediately end upon Executive's obtainment of new employment and eligibility
for similar Welfare Benefit Coverage(s) (with Executive being obligated
hereunder to promptly report such eligibility to the Company). Nothing herein
shall be deemed to adversely affect in any way the additional rights, after
consideration of this extension period, of Executive and his eligible
dependents to health care continuation coverage as required pursuant to Part 6
of Title I of the Employee Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement
services in connection with obtaining new employment up to a maximum cost of
$6,000.
(e) The severance benefits payable under this Agreement
shall be paid to an Executive on or before the fifth day after the last day of
Executive's employment with the Company. Any severance benefits paid pursuant
to this Paragraph will be deemed to be a severance payment and not compensation
for purposes of determining benefits under the Company's qualified plans and
shall be subject to any required tax withholding.
4. INTEREST ON LATE BENEFIT PAYMENTS. If any payment provided
for in Paragraph 3(a) or 3(b) hereof is not made when due, the Company shall
pay to Executive interest on the amount payable from the date that such payment
should have been made under such paragraph until such payment is made, which
interest shall be calculated at the prime or base rate of interest announced by
Texas Commerce Bank N.A. (or any successor thereto) at its principal office in
Houston, Texas and shall change when and as any such change in such prime or
base rate shall be announced by such bank.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding
anything in this Agreement to the contrary, if the severance benefits provided
for in Paragraph 3, together with any other payments which Executive has the
right to receive from the Company, would constitute a "parachute payment" (as
defined in Section 280G(b)(2) of the Code), the severance benefits provided
hereunder shall be either (a) reduced (but not below zero) so that the present
value of such total amounts received by Executive from the Company will be one
dollar ($1.00) less than three times Executive's base amount (as defined in
Section 280G of the Code) and so that no portion of such amounts received by
Executive shall be subject to the excise tax imposed by Section 4999 of the
Code or (b) paid in full, whichever produces the better net after-tax position
to Executive (taking into account any applicable excise tax under Section 4999
of the Code and any applicable income tax). The Company and Executive shall
make an initial determination as to whether a reduction is required and, if so
required, the amount of any such reduction. Executive shall notify the Company
immediately in writing of any claim by the Internal Revenue Service which, if
successful, would require the Company to make a reduction (or a further
reduction in excess of that, if any, initially determined by the Company and
Executive) within five days of the receipt of such claim. The Company shall
notify Executive in writing at least five days prior to the due date of any
response required with respect to such claim if it plans to contest the claim.
If the Company decides to contest such claim, Executive shall cooperate fully
with the Company in such action; provided, however, the Company shall bear and
pay
-4-
<PAGE> 5
directly or indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action. If, as a result of the
Company's action with respect to a claim, the amount of the reduction is found
to have been in excess of the correct reduction amount, the Company shall
promptly pay to Executive the difference between such amounts with respect to
such claim.
6. GENERAL.
(a) TERM. The effective date of this Agreement is
____________________. Within sixty days from and after the expiration of two
years after said effective date and within sixty days after each successive
two-year period of time thereafter that this Agreement is in effect, the
Company shall have the right to review this Agreement, and in its sole
discretion either continue and extend this Agreement, terminate this Agreement,
and/or offer Executive a different agreement. The Board (excluding any member
of the Board who is covered by this Agreement or by a similar agreement with
the Company) will vote on whether to so extend, terminate, and/or offer
Executive a different agreement and will notify Executive of such action within
said sixty-day time period mentioned above. This Agreement shall remain in
effect until so terminated and/or modified by the Company. Failure of the
Board to take any action within said sixty days shall be considered as an
extension of this Agreement for an additional two-year period of time.
Notwithstanding anything to the contrary contained in this "SUNSET PROVISION,"
it is agreed that if a Change of Control occurs while this Agreement is in
effect, then this Agreement shall not be subject to termination or modification
under this "SUNSET PROVISION," and shall remain in force for a period of two
years after such Change of Control, and if within said two years the
contingency factors occur which would entitle Executive to the benefits as
provided herein, this Agreement shall remain in effect in accordance with its
terms. If, within such two years after a Change of Control, the contingency
factors that would entitle Executive to said benefits do not occur, thereupon
this two-year "SUNSET PROVISION" shall again be applicable with the sixty-day
time period for Board action to thereafter commence at the expiration of said
two years after such Change of Control and on each two-year anniversary date
thereafter.
(b) INDEMNIFICATION. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or the Company to enforce or interpret any provision contained
herein, the Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Executive from the earliest date that payment to him should have
been made under this Agreement until such judgment shall have been paid in
full, which interest shall be calculated at the prime or base rate of interest
announced by Texas Commerce Bank N.A. (or any successor thereto) at its
principal office in Houston, Texas, and shall change when and as any such
change in such prime or base rate shall be announced by such bank.
(c) PAYMENT OBLIGATIONS ABSOLUTE. The Company's
obligation to pay (or cause one of its subsidiaries to pay) Executive the
amounts and to make the arrangements
-5-
<PAGE> 6
provided herein shall be absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company (including its
subsidiaries) may have against him or anyone else. All amounts payable by the
Company (including its subsidiaries hereunder) shall be paid without notice or
demand. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and, except as provided in Paragraph 3(c) hereof, the obtaining
of any such other employment shall in no event effect any reduction of the
Company's obligations to make (or cause to be made) the payments and
arrangements required to be made under this Agreement.
(d) SUCCESSORS. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. This Agreement shall also be binding upon and inure to the
benefit of Executive and his estate. If Executive shall die prior to full
payment of amounts due pursuant to this Agreement, such amounts shall be
payable pursuant to the terms of this Agreement to his estate.
(e) SEVERABILITY. Any provision in this Agreement which
is prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(f) NON-ALIENATION. Executive shall not have any right
to pledge, hypothecate, anticipate or assign this Agreement or the rights
hereunder, except by will or the laws of descent and distribution.
(g) NOTICES. Any notices or other communications
provided for in this Agreement shall be sufficient if in writing. In the case
of Executive, such notices or communications shall be effectively delivered if
hand delivered to Executive at his principal place of employment or if sent by
registered or certified mail to Executive at the last address he has filed with
the Company. In the case of the Company, such notices or communications shall
be effectively delivered if sent by registered or certified mail to the Company
at its principal executive offices.
(h) CONTROLLING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas. Further,
Executive agrees that any legal proceeding to enforce the provisions of this
Agreement shall be brought in Houston, Harris County, Texas, and hereby waives
his right to any pleas regarding subject matter or personal jurisdiction and
venue.
(i) RELEASE. As a condition to the receipt of any
benefit under Paragraph 3 hereof, Executive shall first execute a release, in
the form established by the Company, releasing the Company, its shareholders,
partners, officers, directors, employees and agents from any and all claims and
from any and all causes of action of any kind or character, including but not
limited to all claims or causes of action arising out of Executive's employment
with the Company or the termination of such employment.
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<PAGE> 7
(j) FULL SETTLEMENT. If Executive is entitled to and
receives the benefits provided hereunder, performance of the obligations of the
Company hereunder will constitute full settlement of all claims that Executive
might otherwise assert against the Company on account of his termination of
employment.
(k) UNFUNDED OBLIGATION. The obligation to pay amounts
under this Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall create a trust or be deemed to be
secured by any pledge or encumbrance on any property of the Company (including
its subsidiaries).
(l) NOT A CONTRACT OF EMPLOYMENT. This Agreement shall
not be deemed to constitute a contract of employment, nor shall any provision
hereof affect (a) the right of the Company (or its subsidiaries) to discharge
Executive at will or (b) the terms and conditions of any other agreement
between the Company and Executive except as provided herein.
(m) NUMBER AND GENDER. Wherever appropriate herein,
words used in the singular shall include the plural and the plural shall
include the singular. The masculine gender where appearing herein shall be
deemed to include the feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the ______ day of __________________, 1995.
"EXECUTIVE"
__________________________________
"COMPANY"
SEAGULL ENERGY CORPORATION
By:
______________________________
Name:_________________________
Title:________________________
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<PAGE> 1
Exhibit 10.35
SEAGULL ENERGY CORPORATION
MANAGEMENT STABILITY PLAN
The SEAGULL ENERGY CORPORATION MANAGEMENT STABILITY PLAN (the "PLAN")
is hereby adopted pursuant to the authorization of the Board of Directors of
SEAGULL ENERGY CORPORATION (the "COMPANY") for its eligible employees as
follows:
I.
DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. Where the following words and phrases appear
in the Plan, they shall have the respective meanings set forth below, unless
their context clearly indicates to the contrary.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CHANGE IN DUTIES" shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following:
(1) with respect to a Covered Employee of Grade 16 or
higher, a significant reduction in the duties of such Covered Employee
from those applicable to him immediately prior to the date on which a
Change of Control occurs;
(2) a reduction in a Covered Employee's annual salary
or target opportunity under any applicable bonus or incentive
compensation plan from that provided to him immediately prior to the
date on which a Change of Control occurs;
(3) receipt of employee benefits (including but not
limited to medical, dental, life insurance, accidental, death, and
dismemberment, and long-term disability plans) and perquisites by a
Covered Employee after the date on which a Change of Control occurs
that are materially inconsistent with the employee benefits and
perquisites provided by the Employer to other employees of the same
grade; or
(4) a change in the location of a Covered Employee's
principal place of employment by the Employer by more than 50 miles
from the location where he was principally employed immediately prior
to the date on which a Change of Control occurs.
<PAGE> 2
(c) "CHANGE OF CONTROL" shall mean the occurrence of either
of the following events:
(1) the Company (A) shall not be the surviving entity
in any merger, consolidation or other reorganization (or survives only
as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company) or (B) is to be dissolved and liquidated,
and as a result of or in connection with such transaction, the persons
who were directors of the Company before such transaction cease to
constitute a majority of the Board; or
(2) any person or entity, including a "GROUP" as
contemplated by Section 13(d)(3) of the Securities Exchange Act of
1934, acquires or gains ownership or control (including, without
limitation, power to vote) of 20% or more of the outstanding shares of
the Company's voting stock (based upon voting power), and as a result
of or in connection with such transaction, the persons who were
directors of the Company before such transaction cease to constitute a
majority of the Board.
(d) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "COMMITTEE" shall mean the Compensation Committee of
the Board.
(f) "COMPANY" shall mean Seagull Energy Corporation.
(g) "COMPENSATION" shall mean the greater of (1) a Covered
Employee's annual salary plus his Targeted EIP Award, if any, immediately prior
to the date on which a Change of Control occurs or (2) a Covered Employee's
annual salary plus his Targeted EIP Award, if any, at the time of his
Involuntary Termination. "SIX MONTHS' COMPENSATION" shall mean Compensation
divided by 2. "THREE MONTHS' COMPENSATION" shall mean Compensation divided by 4.
"SEMI-MONTHLY COMPENSATION" shall mean Compensation divided by 24.
(h) "COVERED EMPLOYEE" shall mean any individual who, on the
date upon which a Change of Control occurs, is a regular, full-time salaried
employee of the Employer or an hourly employee of the Employer who is normally
scheduled to work 550 or more hours per year, other than (1) any individual
whose terms of employment are governed by a collective bargaining agreement
between a collective bargaining unit and the Employer unless such agreement
provides for coverage of such individual under the Plan, (2) any individual who
is a party to a written agreement with the Employer providing for severance
payments or benefits upon such individual's termination of employment with the
Employer, and (3) an employee who is classified as a temporary, casual, or an
independent contractor under the Employer's employment policies.
(i) "EFFECTIVE DATE" shall mean the date the Board approves
the Plan.
(j) "EIP" shall mean the Seagull Energy Corporation Executive
Incentive Plan or any successor thereto.
-2-
<PAGE> 3
(k) "EMPLOYER" shall mean the Company and each eligible organization
designated as an Employer in accordance with the provisions of Section 4.4 of
the Plan.
(l) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(m) "GRADE" shall mean the greater of (1) a Covered Employee's salary
classification by the Employer immediately prior to the date on which a Change
of Control occurs or (2) a Covered Employee's salary classification by the
Employer at the time of his Involuntary Termination.
(n) "INVOLUNTARY TERMINATION" shall mean any termination of a Covered
Employee's employment with the Employer which:
(1) does not result from a voluntary resignation by
the Covered Employee (other than a resignation pursuant to Clause (2)
of this Section 1.1(n)); or
(2) results from a resignation by a Covered Employee
on or before the date which is sixty days after the date the Covered
Employee receives notice of a Change in Duties;
provided, however, that the term "INVOLUNTARY TERMINATION" shall not include a
Termination for Cause or any termination as a result of a Covered Employee's
death, disability under circumstances entitling him to benefits under the
Employer's long-term disability plan or Retirement.
(o) "OBJECTIVE EIP AWARD" shall mean, with respect to any Covered
Employee, the amount, if any, earned under the objective criterion of the EIP in
effect for the calendar year preceding such Employee's Involuntary Termination.
(p) "RETIREMENT" shall mean the Covered Employee's resignation on or
after the date he reaches age sixty-five.
(q) "TARGETED EIP AWARD" shall mean the Covered Employee's Incentive
Target as set forth under the EIP in effect for the year with respect to which
such award is being determined, if any, or for the last preceding year in which
an EIP was in effect, expressed as a dollar amount based on such Covered
Employee's annual salary for such year.
(r) "TERMINATION FOR CAUSE" shall mean any termination of a Covered
Employee's employment with the Employer by reason of the Covered Employee's (1)
conviction of a felony or a misdemeanor involving moral turpitude, (2)
engagement in conduct which is injurious (monetarily or otherwise) to the
Employer or any of its affiliates (including, without limitation, misuse of the
Employer's or an affiliate's funds or other property), (3) engagement in
business activities which are in conflict with the business
-3-
<PAGE> 4
interests of the Employer, (4) insubordination or (5) engagement in conduct
which is in violation of the Employer's safety rules or standards or which
otherwise may cause or causes injury to another employee or any other person.
(s) "WELFARE BENEFIT COVERAGES" shall mean the medical, dental, life
insurance, accidental death and dismemberment and long-term disability coverages
provided by the Employer to its active employees.
1.2 NUMBER AND GENDER. Wherever appropriate herein, word used in the
singular shall be considered to include the plural and the plural to include the
singular. The masculine gender, where appearing in this Plan, shall be deemed to
include the feminine gender.
1.3 HEADINGS. The headings of Articles and Sections herein are included
solely for convenience and if there is any conflict between such headings and
the text of the Plan, the text shall control.
II.
SEVERANCE BENEFITS
2.1 SEVERANCE BENEFITS. Subject to the provisions of Section 2.2 hereof, if
a Covered Employee's employment by the Employer or successor thereto shall be
subject to an Involuntary Termination which occurs within two years after the
date upon which a Change of Control occurs, then the Covered Employee shall be
entitled to the following severance benefits:
(a) A lump sum cash payment in accordance with the following schedule:
GRADE BENEFIT AMOUNT
16 - 18 2 x Compensation
15 1.5 x Compensation
14 1.25 x Compensation
12 - 13 1 x Compensation
0 - 11 Lesser of:
(1) the sum of (A) Semi-Monthly Compensation
as of his Involuntary Termination for
each full year and fraction thereof of
continuous employment with the Employer
as a Covered Employee from his most
recent date of hire, and (B) Semi-Monthly
Compensation for each full
-4-
<PAGE> 5
$10,000 increment of such Covered Employee's
annual salary at the time of his Involuntary
Termination; provided, however, that in no event
shall any Covered Employee receive less than Three
Months' Compensation; or
(2) 1 x Compensation.
(b) A lump sum cash payment in an amount equal to the remaining
portion of any award to the Covered Employee under any prior years'
EIP. Further, if a Covered Employee's Involuntary Termination occurs on
or after the date an award has been earned under the EIP, but prior to
the date such award is paid, the Covered Employee shall receive an
additional lump sum cash payment in an amount equal to two times his
Objective EIP Award.
(c) A Covered Employee shall be entitled to continue the
Welfare Benefit Coverages for himself and, where applicable, his
eligible dependents following his Involuntary Termination for a number
of months determined in accordance with the following schedule:
GRADE NUMBER OF MONTHS
16 - 18 24
15 18
14 15
12 - 13 12
0 - 11 The number of months for which cash
payments are made under Paragraph (a)
above (rounded to the nearest whole
month if necessary);
provided however, the Covered Employee must continue either to pay the
premiums paid by active employees of the Employer for such coverages or
to pay the actual (nonsubsidized) cost of such coverages for which the
Employer does not subsidize for active employees. Such benefit rights
shall apply only to those Welfare Benefit Coverages which the Employer
has in effect from time to time for active employees, and the
applicable payments shall adjust as premiums for active employees of
the Employer or actual costs, whichever is applicable, change. Welfare
Benefit Coverage(s) shall immediately end upon the Covered Employee's
obtainment of new employment and eligibility for similar Welfare
Benefit Coverage(s) (with the Covered Employee being obligated
hereunder to promptly report such eligibility to the Employer). Nothing
herein shall be deemed to adversely affect in any way the additional
rights, after consideration of this extension period, of Covered
Employees
-5-
<PAGE> 6
and their eligible dependents to health care continuation coverage as
required pursuant to Part 6 of Title I of ERISA.
(d) A Covered Employee of Grade 16 or higher shall be entitled
to receive out-placement services in connection with obtaining new
employment up to a maximum cost of $6,000.
(e) The severance benefits payable under this Plan shall be
paid to a Covered Employee at the time he receives his final
termination pay, or as soon as administratively practicable thereafter,
subject to the conditions set forth in Section 2.2 of the Plan. Any
severance benefits paid pursuant to this Section will be deemed to be a
severance payment and not "Compensation" for purposes of determining
benefits under the Employer's qualified plans and shall be subject to
any required tax withholding.
2.2 RELEASE AND FULL SETTLEMENT. Anything to the contrary
herein notwithstanding, as a condition to the receipt of any severance payment
hereunder, a Covered Employee whose employment by the Employer has been subject
to an Involuntary Termination shall first execute a release, in the form
established by the Committee, releasing the Committee, the Employer, and the
Employer's shareholders, partners, officers, directors, employees and agents
from any and all claims and from any and all causes of action of any kind or
character, including but not limited to all claims or causes of action arising
out of such Covered Employee's employment with the Employer or the termination
of such employment, and the performance of the Employer's obligations hereunder
and the receipt of any benefits provided hereunder by such Covered Employee
shall constitute full settlement of all such claims and causes of action.
2.3 MITIGATION. A Covered Employee shall not be required to
mitigate the amount of any payment provided for in this Article II by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Article II be reduced by any compensation or benefit earned by the
Covered Employee as the result of employment by another employer or by
retirement benefits. The benefits under the Plan are in addition to any other
benefits to which a Covered Employee is otherwise entitled.
2.4 SEVERANCE PAY PLAN LIMITATION. This Plan is intended to be
an employee welfare benefit plan within the meaning of section 3(1) of ERISA and
the Labor Department regulations promulgated thereunder. Therefore, anything to
the contrary herein notwithstanding, in no event shall any Covered Employee
receive total payments under the Plan that exceed the equivalent of twice such
Covered Employee's "annual compensation" (as such term is defined in 29 CFR
Section 2510.3-2(b)(2)) during the year immediately preceding his Involuntary
Termination. If total payments under the Plan to a Covered Employee would
otherwise exceed the limitation in the preceding sentence, the amount payable to
such Covered Employee pursuant to Section 2.1(b) and, if necessary, the amount
payable to such Covered Employee pursuant Section 2.1(a), shall be reduced in
order to satisfy such limitation.
-6-
<PAGE> 7
2.5 PARACHUTE PAYMENTS. Anything to the contrary herein
notwithstanding, if the Covered Employee is a "disqualified individual" (as
defined in Section 280G(c) of the Code), and the severance benefits provided for
in Section 2.1, together with any other payments which the Covered Employee has
the right to receive from the Employer, would constitute a "parachute payment "
(as defined in Section 280G(b)(2) of the Code), the severance benefits provided
hereunder shall be either (a) reduced (but not below zero) so that the present
value of such total amounts received by the Covered Employee from the Employer
will be one dollar ($1.00) less than three times the Covered Employee's base
amount (as defined in Section 280G of the Code) and so that no portion of such
amounts received by the Covered Employee shall be subject to the excise tax
imposed by Section 4999 of the Code or (b) paid in full, whichever produces the
better net after-tax position to the Covered Employee (taking into account any
applicable excise tax under Section 4999 of the Code and any applicable income
tax). The determination as to whether any such reduction in the amount of the
severance benefits is necessary shall be made by the Employer in good faith, and
such determination shall be conclusive and binding on the Covered Employee. If a
reduced cash payment is made and through error or otherwise that payment, when
aggregated with other payments from the Employer (or its affiliates) used in
determining if a "parachute payment" exists, exceeds one dollar ($1.00) less
than three times the Covered Employee's base amount, the Covered Employee shall
immediately repay such excess to the Employer upon notification that an
overpayment has been made.
III.
ADMINISTRATION OF PLAN
3.1 COMMITTEE'S POWERS AND DUTIES. It shall be a principal duty
of the Committee to see that the Plan is carried out, in accordance with its
terms, for the exclusive benefit of persons entitled to participate in the Plan.
The Committee shall be the named fiduciary and shall have full power to
administer the Plan in all of its details, subject to applicable requirements of
law. For this purpose, the Committee's powers shall include, but not be limited
to, the following authority, in addition to all other powers provided by this
Plan:
(a) to make and enforce such rules and regulations as it
deems necessary or proper for the efficient administration of the Plan;
(b) to interpret the Plan, its interpretation thereof to
be final and conclusive on all persons claiming benefits under the Plan;
(c) to decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan;
(d) to make a determination as to the right of any person to a
benefit under the Plan (including, without limitation, to determine
whether and when there has been a termination of a Covered Employee's
employment and the cause of such termination);
-7-
<PAGE> 8
(e) to appoint such agents, counsel, accountants,
consultants, claims administrator and other persons as may be required
to assist in administering the Plan;
(f) to allocate and delegate its responsibilities under
the Plan and to designate other persons to carry out any of its
responsibilities under the Plan, any such allocation, delegation or
designation to be in writing;
(g) to sue or cause suit to be brought in the name of the
Plan; and
(h) to obtain from the Employer and from Covered
Employees such information as is necessary for the proper
administration of the Plan.
3.2 MEMBER'S OWN PARTICIPATION. No Covered Employee or agent of
the Committee may act, vote, or otherwise influence a decision of the Committee
specifically relating to himself as a participant in the Plan.
3.3 INDEMNIFICATION. The Company shall indemnify and hold
harmless each member of the Committee against any and all expenses and
liabilities arising out of his administrative functions or fiduciary
responsibilities, including any expenses and liabilities that are caused by or
result from an act or omission constituting the negligence of such member in the
performance of such functions or responsibilities, but excluding expenses and
liabilities that are caused by or result from such member's own gross negligence
or willful misconduct. Expenses against which such member shall be indemnified
hereunder shall include, without limitation, the amounts of any settlement or
judgment, costs, counsel fees, and related charges reasonably incurred in
connection with a claim asserted or a proceeding brought or settlement thereof.
3.4 COMPENSATION, BOND AND EXPENSES. The members of the
Committee shall not receive compensation with respect to their services for the
Committee. To the extent required by applicable law, but not otherwise,
Committee members shall furnish bond or security for the performance of their
duties hereunder. Any expenses properly incurred by the Committee incident to
the administration, termination or protection of the Plan, including the cost of
furnishing bond, shall be paid by the Company.
3.5 CLAIMS PROCEDURE. Any employee that the Committee
determines is entitled to a benefit under the Plan is not required to file a
claim for benefits. Any employee who is not paid a benefit and who believes that
he is entitled to a benefit or who has been paid a benefit and who believes that
he is entitled to a greater benefit may file a claim for benefits under the Plan
in writing with the Committee. In any case in which a claim for Plan benefits by
a Covered Employee is denied or modified, the Committee shall furnish written
notice to the claimant within ninety days (or within 180 days if additional
information requested by the Committee necessitates an extension of the
ninety-day period), which notice shall:
(a) state the specific reason or reasons for the denial
or modification;
-8-
<PAGE> 9
(b) provide specific reference to pertinent Plan provisions on
which the denial or modification is based;
(c) provide a description of any additional material or
information necessary for the Covered Employee or his representative
to perfect the claim, and an explanation of why such material or
information is necessary; and
(d) explain the Plan's claim review procedure as contained
herein.
In the event a claim for Plan benefits is denied or modified, if the Covered
Employee or his representative desires to have such denial or modification
reviewed, he must, within sixty days following receipt of the notice of such
denial or modification, submit a written request for review by the Committee of
its initial decision. In connection with such request, the Covered Employee or
his representative may review any pertinent documents upon which such denial or
modification was based and may submit issues and comments in writing. Within
sixty days following such request for review the Committee shall, after
providing a full and fair review, render its final decision in writing to the
Covered Employee and his representative, if any, stating specific reasons for
such decision and making specific references to pertinent Plan provisions upon
which the decision is based. If special circumstances require an extension of
such sixty-day period, the Committee's decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
If an extension of time for review is required, written notice of the extension
shall be furnished to the Covered Employee and his representative, if any, prior
to the commencement of the extension period.
3.6 MANDATORY ARBITRATION. If a Covered Employee or his representative
is not satisfied with the decision of the Committee pursuant to the Plan's
claims review procedure, such Covered Employee or his representative may,
within sixty days of receipt of the written decision of the Committee,
request by written notice to the Committee, that his claim be submitted to
arbitration pursuant to the labor arbitration rules of the American Arbitration
Association. Such arbitration shall be the sole and exclusive procedure
available to a Covered Employee or his representative for review of a decision
of the Committee. In reviewing the decision of the Committee, the arbitrator
shall use the standard of review which would be used by a Federal court in
reviewing such decision under the provisions of ERISA. The Covered Employee or
his representative and the Plan shall share equally the cost of such
arbitration. The arbitrator's decision shall be final and legally binding on
both parties. This Section shall be governed by the provisions of the Federal
Arbitration Act.
IV.
GENERAL PROVISIONS
4.1 FUNDING. The benefits provided herein shall be unfunded and
shall be provided from the Employer's general assets.
-9-
<PAGE> 10
4.2 COST OF PLAN. The entire cost of the Plan shall be borne by the
Employer and no contributions shall be required of the Covered Employees.
4.3 PLAN YEAR. The Plan shall operate on a plan year consisting of the
twelve consecutive month period commencing on January 1 of each year with a
short plan year commencing on the Effective Date and ending on December 31,
1995.
4.4 OTHER PARTICIPATING EMPLOYERS. The Committee may designate any
entity or organization eligible by law to participate in this Plan as an
Employer by written instrument delivered to the Secretary of the Company and the
designated Employer. Such written instrument shall specify the effective date of
such designated participation, may incorporate specific provisions relating to
the operation of the Plan which apply to the designated Employer only and shall
become, as to such designated Employer and its employees, a part of the Plan.
Each designated Employer shall be conclusively presumed to have consented to its
designation and to have agreed to be bound by the terms of the Plan and any and
all amendments thereto upon its submission of information to the Committee
required by the terms of or with respect to the Plan; provided, however, that
the terms of the Plan may be modified so as to increase the obligations of an
Employer only with the consent of such Employer, which consent shall be
conclusively presumed to have been given by such Employer upon its submission of
any information to the Committee required by the terms of or with respect to the
Plan. Except as modified by the Committee in its written instrument, the
provisions of this Plan shall be applicable with respect to each Employer
separately, and amounts payable hereunder shall be paid by the Employer which
employs the particular Covered Employee.
4.5 AMENDMENT AND TERMINATION. The Plan may be amended from time to
time, or terminated and discontinued, at any time, in each case at the
discretion of the Board. Notwithstanding the foregoing, this Plan may not be
amended to reduce benefits or rights to benefits or terminated within two years
following a Change of Control. For purposes of this Section, a change in the
designation by the Committee of Participating Employers pursuant to Section 4.4
shall be deemed to be an amendment to the Plan.
4.6 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of the
Plan shall not be deemed to be a contract of employment between the Employer and
any person or to be consideration for the employment of any person. Nothing
herein contained shall be deemed to give any person the right to be retained in
the employ of the Employer or to restrict the right of the Employer to discharge
any person at any time nor shall the Plan be deemed to give the Employer the
right to require any person to remain in the employ of the Employer or to
restrict any person's right to terminate his employment at any time.
4.7 SEVERABILITY. Any provision in the Plan that is prohibited or
unenforceable in any jurisdiction by reason of applicable law shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
-10-
<PAGE> 11
4.8 NONALIENATION. Covered Employees shall not have any right to
pledge, hypothecate, anticipate or assign benefits or rights under the Plan,
except by will or the laws of descent and distribution.
4.9 EFFECT OF PLAN. This Plan is intended to supersede all prior oral
or written policies of the Employer and all prior oral or written communications
to Covered Employees with respect to the subject matter hereof, and all such
prior policies or communications are hereby null and void and of no further
force and effect. Further, this Plan shall be binding upon the Employer and any
successor of the Employer, by merger or otherwise, and shall inure to the
benefit of and be enforceable by the Employer's Covered Employees.
4.10 GOVERNING LAW. The Plan shall be interpreted and construed in
accordance with the laws of the State of Texas, except to the extent preempted
by federal law.
EXECUTED this 17th day of March, 1995.
SEAGULL ENERGY CORPORATION
BY: /s/ ROBERT W. SHOWER
-----------------------------------
NAME: Robert W. Shower
-----------------------------
TITLE: Exec. Vice President & CFO
-----------------------------
-11-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
The Company was incorporated in Texas in 1973. The following is a
listing of significant subsidiaries of the Company as of March 10, 1995:
<TABLE>
<CAPTION>
% Voting
Securities
Jurisdiction of or Beneficial
Name of Subsidiary Incorporation Interest Owned
or Organization by the Company
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alaska Pipeline Company Alaska 100%
Cavallo Pipeline Company Texas 50%
(partnership)
Houston Oil & Minerals Corporation Nevada 100%
Seagull Energy Canada Holding Company Wyoming 100%
Seagull Energy Canada Ltd. Alberta, Canada 100%
Seagull Energy E&P Inc. Delaware 100%
Seagull Industrial Pipeline Company Texas 100%
Seagull Marketing Services, Inc. Texas 100%
Seagull Midcon Inc. Delaware 100%
Seagull Mid-South Inc. Delaware 100%
Seagull Natural Gas Company Delaware 100%
Seagull Pipeline & Marketing Delaware 100%
Seagull Processing Company Delaware 100%
Wacker Oil Inc. Delaware 100%
=============================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Seagull Energy Corporation:
We consent to the incorporation by reference in the following
Registration Statements of Seagull Energy Corporation of our report dated
January 27, 1995, relating to the consolidated balance sheets of Seagull Energy
Corporation and Subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1994, which
report appears or is incorporated by reference in the December 31, 1994 Annual
Report on Form 10-K of Seagull Energy Corporation:
a. Form S-8, Seagull Thrift Plan (2-72014).
b. Form S-8, Seagull Energy Corporation 1981 Non-Qualified and
Incentive Stock Option Plan (2-80834).
c. Form S-8, ENSTAR Natural Gas Company Thrift Plan (33-14463).
d. Forms S-8 and S-3, Seagull Energy Corporation 1983 Stock
Option Plan (2-93087).
e. Forms S-8 and S-3, Seagull Energy Corporation 1986 Stock
Option Plan (33-22475).
f. Form S-8, Seagull Energy Corporation 1990 Stock Option Plan
(33-43483).
g. Form S-8, Seagull Energy Corporation 1993 Stock Option Plan
(33-50643).
h. Form S-8, Seagull Energy Corporation 1993 Nonemployee
Directors' Stock Option Plan (33-50645).
i. Form S-3, $350,000,000 Debt Securities of Seagull Energy
Corporation (33-65118).
j. Form S-3, ENSTAR Alaska Group of Common Stock of Seagull
Energy Corporation (33-53729).
Our report refers to a change in accounting principle for the adoption
of the Financial Accounting Standards Board Statement of Financial Accounting
Standard No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions and No. 109, Accounting for Income Taxes.
KPMG Peat Marwick LLP
Houston, Texas
March 28, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report on Form
10-K of Seagull Energy Corporation and Subsidiaries (the "Company") for the
year ended December 31, 1994, and the incorporation by reference thereof into
the Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834,
33-14463, 33-43483, 33-50643 and 33-50645), Forms S-8 and S-3 (Nos. 2-93087 and
33-22475) and Forms S-3 (No. 33-53729 and 33-65118).
<TABLE>
<S> <C>
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 23, 1995
</TABLE>
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report to
Shareholders of Seagull Energy Corporation and Subsidiaries (the "Company") for
the year ended December 31, 1994 (the "Annual Report") in Note 4, Supplemental
Gas and Oil Producing Activities, of Notes to Consolidated Financial
Statements; provided, however, since the Annual Report contains only aggregate
reserve information that combines the reserve and discounted present worth
estimates prepared by DeGolyer and MacNaughton with the reserve and discounted
present worth estimates of other petroleum consultants, in providing our
consent we have necessarily relied on a letter dated March 10, 1995, from the
Company with respect to the estimates of such other petroleum consultants to
verify that the Annual Report correctly reflects our estimates. The Company's
Annual Report on Form 10-K for the year ended December 31, 1994 (the "Form
10-K") incorporates by reference the Annual Report. We further consent to the
use of our name under the heading "Exploration and Production" of Item 1 in the
Form 10-K and the incorporation by reference of the Form 10-K into the
Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463,
33-43483, 33-50643 and 33-50645), Forms S-8 and S-3 (Nos. 2-93087 and 33-22475)
and Forms S-3 (No. 33-53729 and 33-65118).
<TABLE>
<S> <C>
DeGOLYER AND MacNAUGHTON
PETROLEUM ENGINEERS
Dallas, Texas
March 23, 1995
</TABLE>
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report on Form
10-K of Seagull Energy Corporation and Subsidiaries (the "Company") for the
year ended December 31, 1994, and the incorporation by reference thereof into
the Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834,
33-14463, 33-43483, 33-50643 and 33-50645), Forms S-8 and S-3 (Nos. 2-93087 and
33-22475) and Forms S-3 (No. 33-53729 and 33-65118).
<TABLE>
<S> <C>
NETHERLAND, SEWELL & ASSOCIATES, INC.
PETROLEUM ENGINEERS
Houston, Texas
March 28, 1995
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,432
<SECURITIES> 0
<RECEIVABLES> 101,346
<ALLOWANCES> 0
<INVENTORY> 4,530
<CURRENT-ASSETS> 119,363
<PP&E> 1,592,152
<DEPRECIATION> 467,845
<TOTAL-ASSETS> 1,299,550
<CURRENT-LIABILITIES> 133,194
<BONDS> 0
<COMMON> 3,643
0
0
<OTHER-SE> 437,458
<TOTAL-LIABILITY-AND-EQUITY> 1,299,550
<SALES> 408,104
<TOTAL-REVENUES> 408,104
<CGS> 54,465
<TOTAL-COSTS> 346,037
<OTHER-EXPENSES> 9,585
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,550
<INCOME-PRETAX> 932
<INCOME-TAX> (2,314)
<INCOME-CONTINUING> 3,246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,246
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Report of Management to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA(1)(2)
(Dollars in Thousands Except Per Share Amounts)
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993 1992 1991 1990
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . $ 408,104 $ 377,165 $ 238,829 $ 248,537 $ 219,908
Earnings applicable to
common stock(3) . . . . . . . . . 3,246 27,198 6,688 5,107 20,564
Earnings per share(3)(4) . . . . . . 0.09 0.76 0.26 0.23 1.11
Net cash provided by operating
activities before changes in
operating assets and liabilities . 166,765 160,762 81,368 66,654 64,822
Net cash provided by
operating activities . . . . . . . 170,925 119,761 72,187 69,773 87,321
Total assets . . . . . . . . . . . . 1,299,550 1,118,251 1,102,964 618,552 389,619
Long-term portion of debt . . . . . . 620,805 459,787 608,011 219,154 49,239
Shareholders' equity(5) . . . . . . . 441,101 439,379 243,673 235,797 192,516
Capital expenditures . . . . . . . . 150,252 112,042 43,651 71,709 50,293
Acquisitions, net of cash acquired . 193,859 29,470 401,888 201,767 54,320
===================================================================================================================
</TABLE>
(1) Reference is made to the Consolidated Financial Statements of Seagull
Energy Corporation and Subsidiaries and Notes thereto, appearing on pages
31 through 62 of this Annual Report.
(2) Includes Wacker Oil Inc. since June 28, 1990, certain gas and oil assets
purchased from Mesa Limited Partnership since March 8, 1991, Seagull
Mid-South Inc. since December 31, 1992, and Seagull Energy Canada Ltd.
since January 4, 1994.
(3) 1992 includes the cumulative effect of two changes in accounting principles
representing an increase in earnings of approximately $2.3 million, or
$0.09 per share.
(4) Per share data have been restated to reflect a two-for-one split of the
Company's common shares effected June 4, 1993.
(5) The Company has not declared any cash dividends on its common stock since
it became a public entity in 1981.
SEAGULL ENERGY CORPORATION
19
<PAGE> 2
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
CONSOLIDATED HIGHLIGHTS
(Dollars in Thousands Except Per Share Amounts)
-------------------------------------------------------------------------------------------------------------------
Percent Change
1994 1993 1992 1993-'94 1992-'93
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Exploration and production . . . . . . . . $ 262,543 $ 227,437 $ 91,991 + 15 + 147
Pipeline and marketing . . . . . . . . . . . 39,963 42,484 37,240 - 6 + 14
Alaska transmission and distribution . . . . 105,598 107,244 109,598 - 2 - 2
-------------------------------------------------------------------------------------------------------------------
$ 408,104 $ 377,165 $ 238,829 + 8 + 58
===================================================================================================================
Operating profit (loss):
Exploration and production . . . . . . . . . $ 28,266 $ 42,969 $ (1,613) - 34 + 2,764
Pipeline and marketing . . . . . . . . . . . 11,936 14,065 9,057 - 15 + 55
Alaska transmission and distribution . . . . 21,865 18,955 22,439 + 15 - 16
-------------------------------------------------------------------------------------------------------------------
$ 62,067 $ 75,989 $ 29,883 - 18 + 154
===================================================================================================================
Net earnings(*) . . . . . . . . . . . . . . . . $ 3,246 $ 27,198 $ 6,688 - 88 + 307
Net cash provided by operating activities before
changes in operating assets and liabilities 166,765 160,762 81,368 + 4 + 98
Net cash provided by operating activities . . . 170,925 119,761 72,187 + 43 + 66
Earnings per share(*) . . . . . . . . . . . . . 0.09 0.76 0.26 - 88 + 192
===================================================================================================================
Weighted average number of common shares
outstanding (in thousands) . . . . . . . . . 36,904 35,790 25,583 + 3 + 40
===================================================================================================================
</TABLE>
(*) 1992 includes the cumulative effect of two changes in accounting principles
representing an increase in earnings of approximately $2.3 million, or
$0.09 per share.
Revenues and Operating profit (loss) are discussed in the respective
segment sections.
================================================================================
1994 RESULTS COMPARED TO 1993
--------------------------------------------------------------------------------
Seagull Energy Corporation and Subsidiaries ("Seagull" or the "Company")
recorded a decrease in net earnings for the year ended December 31, 1994 as
compared to 1993 due to a decrease in operating profit and an increase in
interest expense partially offset by a decrease in income taxes. Operating
profit decreased from 1993 to 1994 primarily due to a 34% decrease in the
operating profit of the exploration and production segment. The 40% increase in
interest expense was a result of a higher level of debt outstanding due to debt
incurred to finance the acquisition of Seagull Canada discussed below, and an
increase in interest rates. Net earnings in 1994 include a pre-tax expense of
approximately $2.0 million relating to costs incurred in obtaining shareholder
approval to create a new class of common stock of the Company intended to
reflect separately the performance of the Company's Alaska transmission and
distribution segment (the "ENSTAR Alaska Stock"). The 1993 results included a
pre-tax gain of approximately $3.8 million ($2.8 million after taxes) relating
to sales of non-strategic producing properties.
Net cash provided by operating activities before changes in operating
assets and liabilities for 1994 increased in comparison to 1993 primarily due
to the acquisition of Novalta Resources Inc. (the "Seagull Canada Acquisition")
and to production beginning in late 1993 and early 1994 from certain of the
Company's discoveries
SEAGULL ENERGY CORPORATION
20
<PAGE> 3
CONSOLIDATED FINANCIAL STATEMENTS
partially offset by lower natural gas prices and higher interest expense. Net
cash provided by operating activities after changes in operating assets and
liabilities for 1994 increased substantially in comparison to 1993 primarily
due to significant decreases during 1993 in both accounts payable and prepaid
gas and oil sales. Accounts payable recorded in connection with the Mid-South
Acquisition, discussed below, at December 31, 1992 decreased substantially
during the first year of operations by the Company.
================================================================================
1993 RESULTS COMPARED TO 1992
--------------------------------------------------------------------------------
The Company's net earnings increased significantly for the year ended
December 31, 1993 versus the prior year due to an increase in operating profit,
partially offset by increases in interest and general and administrative
expenses. Net earnings for 1993 include a pre-tax gain of approximately $3.8
million relating to sales of non-strategic producing properties. Seagull's 1993
net earnings also benefited from a reduction in the Company's income tax
provision due to utilization of approximately $4.8 million in tax credits
allowed under Section 29 of the Internal Revenue Code of 1986, as amended, (the
"Section 29 Credits"), which more than offset a 1% increase in the federal
corporate tax rate from 34% to 35%. In addition, net earnings for 1992 included
a $4.6 million pre-tax settlement of litigation (the "Seismic Litigation
Settlement") and the cumulative effect of two changes in accounting principles
described below. See "Other (Income) Expense" and "Income Taxes" sections
below.
Effective January 1, 1992, Seagull adopted two Statements of Financial
Accounting Standards ("SFAS"), SFAS No. 109, Accounting for Income Taxes, and
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. The cumulative effect of these accounting changes as of January 1,
1992 resulted in an increase in net earnings of approximately $2.3 million, or
$0.09 per share, as reflected in the Company's consolidated statement of
earnings for the year ended December 31, 1992.
Net cash provided by operating activities before and after changes in
operating assets and liabilities for 1993 increased substantially in comparison
to 1992 primarily as a result of significant increases in the Company's natural
gas production primarily due to Seagull's acquisition of Arkla Exploration
Company from NorAm, Inc., formerly Arkla, Inc., (the "Mid-South Acquisition")
on December 31, 1992.
On June 4, 1993, the Company effected, in the form of a 100% stock
dividend, a two-for-one stock split (the "Stock Split") of all the issued
shares of Seagull common stock ("Common Stock"). The weighted average number of
common shares outstanding and per share amounts for all periods have been
restated to reflect the Stock Split. All share amounts included in the
consolidated statements of shareholders' equity as of dates prior to June 4,
1993 were not adjusted to reflect the Stock Split.
The increase in the weighted average number of common shares outstanding
in 1993 over 1992 was due to the February 1993 sale of 5,060,000 shares
(10,120,000 shares after the Stock Split) of Common Stock pursuant to an
underwritten public offering.
SEAGULL ENERGY CORPORATION
21
<PAGE> 4
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
EXPLORATION AND PRODUCTION
(Dollars in Thousands Except Per Unit Amounts)
-------------------------------------------------------------------------------------------------------------------
Percent Change
1994 1993 1992 1993-'94 1992-'93
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Natural gas . . . . . . . . . . . . . . . . . $ 237,269 $ 203,137 $ 70,689 + 17 + 187
Oil and condensate . . . . . . . . . . . . . 23,346 23,597 18,849 - 1 + 25
Natural gas liquids . . . . . . . . . . . . . 2,889 3,132 2,706 - 8 + 16
Other . . . . . . . . . . . . . . . . . . . . (961) (2,429) (253) + 60 - 860
-------------------------------------------------------------------------------------------------------------------
262,543 227,437 91,991 + 15 + 147
Lifting costs . . . . . . . . . . . . . . . . . 63,989 53,243 26,230 + 20 + 103
General operating expense . . . . . . . . . . . 11,353 10,408 4,614 + 9 + 126
Exploration charges . . . . . . . . . . . . . . 26,888 17,265 9,905 + 56 + 74
Depreciation, depletion and amortization . . . 132,047 103,552 52,855 + 28 + 96
-------------------------------------------------------------------------------------------------------------------
Operating profit (loss) . . . . . . . . . . . . $ 28,266 $ 42,969 $ (1,613) - 34 + 2,764
===================================================================================================================
OPERATING DATA:
Net daily production(1):
Natural gas (MMcf) . . . . . . . . . . . . . 355.2 279.5 104.2 + 27 + 168
Oil and condensate (Bbl) . . . . . . . . . . 4,186 3,868 2,769 + 8 + 40
Natural gas liquids (Bbl) . . . . . . . . . . 877 773 725 + 13 + 7
Combined (MMcfe)(2) . . . . . . . . . . . . . 385.6 307.4 125.2 + 25 + 146
Average sales prices:
Natural gas ($ per Mcf) . . . . . . . . . . . 1.83 1.99 1.85 - 8 + 8
Oil and condensate ($ per Bbl) . . . . . . . 15.28 16.72 18.60 - 9 - 10
Natural gas liquids ($ per Bbl) . . . . . . . 9.03 11.10 10.20 - 19 + 9
Combined ($ per Mcfe)(2) . . . . . . . . . . 1.87 2.03 2.01 - 8 + 1
Lifting costs ($ per Mcfe):
Lease operating expense . . . . . . . . . . . 0.26 0.25 0.33 + 4 - 24
Workover expense . . . . . . . . . . . . . . 0.02 0.04 0.05 - 50 - 20
Production taxes . . . . . . . . . . . . . . 0.06 0.08 0.09 - 25 - 11
Transportation expense . . . . . . . . . . . 0.08 0.07 0.06 + 14 + 17
Ad valorem taxes . . . . . . . . . . . . . . 0.03 0.03 0.04 -- - 25
Total . . . . . . . . . . . . . . . . . . . . 0.45 0.47 0.57 - 4 - 18
DD&A rate ($ per Mcfe) . . . . . . . . . . . . 0.94 0.92 1.15 + 2 - 20
===================================================================================================================
</TABLE>
(1) Natural gas stated in million cubic feet ("MMcf") or thousand cubic feet
("Mcf"); oil and condensate and natural gas liquids stated in barrels
("Bbl").
(2) Mcfe and MMcfe represent the equivalent of one thousand cubic feet and
one million cubic feet of natural gas, respectively. Oil and condensate
and natural gas liquids are converted to gas at a ratio of one barrel of
liquids per six Mcf of gas, based on relative energy content.
================================================================================
1994 RESULTS COMPARED TO 1993
--------------------------------------------------------------------------------
Operating profit for the exploration and production ("E&P") segment for
the year ended December 31, 1994 as compared to 1993 decreased, despite higher
natural gas production, due to lower natural gas prices and increased
depreciation, depletion and amortization ("DD&A") expense, lifting costs and
exploration charges.
The natural gas production increases were primarily due to production
contributed from properties acquired in connection with the Seagull Canada
Acquisition on January 4, 1994, which averaged 54.1 MMcf per day for the year
ended December 31, 1994, and to production beginning in late 1993 and early
1994 from certain of the Company's discoveries. The increases in production
would have been higher but for voluntary curtailments for approximately
one-third of the
SEAGULL ENERGY CORPORATION
22
<PAGE> 5
CONSOLIDATED FINANCIAL STATEMENTS
year during 1994 when natural gas prices were below acceptable levels.
DD&A expense and lifting costs increased as a result of the significant
increases in production. DD&A expense per equivalent unit of production also
increased from 1993 to 1994 primarily as a result of the change in the mix of
the properties being produced. While total lifting costs increased from 1993
to 1994, lifting costs per equivalent unit of production declined 4% due
primarily to a decrease in workover expenses and production taxes.
Exploration charges increased primarily due to higher dry hole costs
and the increased use of 3-D seismic surveys on offshore exploratory blocks.
During 1994 Seagull was successful on 10 gross exploratory wells in 23
attempts, compared with eight successes out of 27 wells drilled in 1993. The
1994 results include five successful gross exploratory wells in six attempts in
Canada. The increased dry hole expense per well is primarily due to Seagull
retaining larger working interests in 1994 in the wells drilled offshore Texas
and Louisiana and costs associated with deepening successful exploratory wells
to deeper zones which proved to be dry.
================================================================================
1993 RESULTS COMPARED TO 1992
--------------------------------------------------------------------------------
The increase in operating profit of the E&P segment for the year ended
December 31, 1993 as compared to 1992 was due to a significant increase in
revenues as a result of increased natural gas production and higher natural gas
prices, which more than offset increases in DD&A expense, exploration charges
and lifting costs.
DD&A expense and lifting costs increased as a result of the significant
increase in production. However, both DD&A expense and lifting costs per
equivalent unit of production declined in 1993. Exploration charges also
increased in 1993 due to higher dry hole costs as a result of increased
exploratory activity. In 1993, Seagull was successful on eight gross
exploratory wells in 27 attempts, compared with three successes out of 15 wells
drilled during 1992.
The increase in natural gas production was primarily due to
contributions from properties acquired in connection with the Mid-South
Acquisition, which more than doubled the Company's proved natural gas reserves.
In addition, because of the improvement in natural gas prices, Seagull had
substantially no price-related curtailments of gas production in 1993 compared
with significant curtailments in prior years.
================================================================================
OUTLOOK
--------------------------------------------------------------------------------
The E&P segment is the Company's primary growth area. That growth has
been achieved over the past seven years primarily through acquisitions: Houston
Oil & Minerals Corporation ("HO&M") in 1988; the assets of Houston Oil Trust in
1989; Wacker Oil Inc. in 1990; certain gas and oil assets from Mesa Limited
Partnership in 1991; Seagull Mid-South Inc., formerly Arkla Exploration
Company, in 1992 and Seagull Energy Canada Ltd. ("Seagull Canada"), formerly
Novalta Resources Inc. ("Novalta") in 1994. See Note 2 of Notes to Consolidated
Financial Statements beginning on page 35 of this Annual Report.
The future results of the E&P segment will be affected by the market
prices of natural gas and oil. The availability of a ready market for oil,
natural gas and liquid products in the future will depend on numerous factors
beyond the control of the Company, including weather, production of other crude
oil, natural gas and liquid products, imports, marketing of competitive fuels,
proximity and capacity of oil and gas pipelines and other transportation
facilities, any oversupply or undersupply of oil, gas and liquid products, the
regulatory environment, and other regional and political events, none of which
can be predicted with certainty. During 1994 several of these factors (warm
weather, low demand for storage refills, new gas supply, utilization of
competitive fuels) combined to drive natural gas prices lower. Gas prices
declined steadily throughout the year after hitting levels of $2.19 per Mcf
domestically and $1.89 per Mcf in Canada during the first quarter. The low
point was in the fourth quarter, when gas prices averaged $1.59 per Mcf in the
U.S. and $1.33 per Mcf in Canada. Average prices for the full year came to
$1.88 per Mcf domestically and $1.55 per Mcf in Canada.
As a result of the factors mentioned above, the
SEAGULL ENERGY CORPORATION
23
<PAGE> 6
CONSOLIDATED FINANCIAL STATEMENTS
Company's average natural gas price for the month ended January 31, 1995
continued to decline to $1.62 per Mcf domestically and $1.01 per Mcf in Canada.
E&P operating profit for the first quarter of 1995 is expected to be
significantly lower than the first quarter of 1994 as a result of the lower
natural gas prices the Company is receiving in early 1995 and the higher number
of exploratory wells that will be drilled in the quarter that could result in
an increase in dry hole costs. If natural gas prices remain low throughout
1995, E&P operating profit is expected to be substantially lower for the year
ended December 31, 1995 versus 1994. As in the past, the Company expects to
continue curtailing a portion of its gas production whenever prices are deemed
to be below acceptable levels.
As E&P operating profit represented nearly half of the Company's total
operating profit in 1994, a substantial decrease in E&P operating profit will
have a significant impact on the Company's total operating profit. Operating
profit for the Company's other two business segments, pipeline and marketing
and Alaska transmission and distribution, is not expected to change
significantly in 1995. However, Seagull expects its interest costs to increase
again in 1995 due to the effect of higher interest rates for the entire year.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PIPELINE AND MARKETING
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Percent Change
1994 1993 1992 1993-'94 1992-'93
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING PROFIT:
Pipelines . . . . . . . . . . . . . . . . . . . $ 6,334 $ 8,561 $ 5,671 - 26 + 51
Marketing and supply . . . . . . . . . . . . . 3,772 2,862 784 + 32 + 265
Gas processing . . . . . . . . . . . . . . . . 784 518 2,157 + 51 - 76
Operating and construction services . . . . . . 1,046 2,124 445 - 51 + 377
-------------------------------------------------------------------------------------------------------------------
$ 11,936 $ 14,065 $ 9,057 - 15 + 55
===================================================================================================================
OPERATING DATA:
Average daily volumes (MMcf):
Gas gathering . . . . . . . . . . . . . . . 277 311 196 - 11 + 59
Partnership systems (net) . . . . . . . . . 112 117 102 - 4 + 15
Marketing and supply . . . . . . . . . . . . 552 446 290 + 24 + 54
Gas processing(*):
Average daily inlet volumes (MMcf) . . . . . 278 273 243 + 2 + 12
Average daily net production (Bbl) . . . . . 4,140 3,305 3,198 + 25 + 3
===================================================================================================================
</TABLE>
(*) 1994 and 1993 include contributions from two small onshore plants.
SEAGULL ENERGY CORPORATION
24
<PAGE> 7
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1994 RESULTS COMPARED TO 1993
--------------------------------------------------------------------------------
In the pipeline and marketing segment, operating profit decreased for
the year ended December 31, 1994 as compared to 1993 primarily due to declines
in the pipelines and operating and construction services areas, partially
offset by an increase in the marketing and supply area.
Operating profit in the pipelines area, which includes the Company's gas
gathering and product pipeline systems as well as the Company's interests in
two partnership systems, decreased in 1994 from 1993 primarily as a result of
reduced volumes delivered due to the natural depletion of the reserves serviced
by the systems. This trend is expected to continue, at least until pricing
improvement causes producers to increase drilling activity.
In the marketing and supply area, operating profit improved in 1994 over
1993 due to a 24% increase in sales volumes due primarily to increases in the
E&P segment's domestic natural gas production. If weak prices cause Seagull and
other producers to curtail gas production for large parts of 1995, it will be
difficult for marketing and supply's profit contribution to match that of 1994.
The operating profit for the operating and construction services area
declined in 1994 because of the first quarter completion of a gas pipeline
construction project the Company began in mid-1993.
================================================================================
1993 RESULTS COMPARED TO 1992
--------------------------------------------------------------------------------
Operating profit increased in 1993 over 1992 primarily due to
improvements in the pipelines and gas marketing areas and as a result of
profits recognized from the pipeline construction project discussed above.
These contributions more than offset a decline in operating profit in the gas
processing area.
Operating profit in the pipelines area improved in 1993 over 1992
primarily due to a full year of transportation through four new gas gathering
systems, two acquired in June 1992 and two acquired as part of the Mid-South
Acquisition in December 1992. An increase in volumes delivered by the Company's
partnership systems also contributed to the improvement.
In the marketing and supply area, operating profit improved in 1993 over
1992 due to a 54% increase in sales volumes primarily as a result of increases
in the E&P segment's natural gas production discussed earlier and a 13%
increase in margins.
Operating profit in the gas processing area declined in 1993 from 1992
primarily due to increases in natural gas costs and significant declines in
prices received for extracted products. The profitability of the gas processing
area is largely determined by the relative strengths and weaknesses in gas and
liquids prices.
Historically, the Company has not been engaged in pipeline construction
projects on a consistently recurring basis. Seagull is currently conducting
marketing efforts and anticipates it will generate new projects.
SEAGULL ENERGY CORPORATION
25
<PAGE> 8
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
ALASKA TRANSMISSION AND DISTRIBUTION
(Dollars in Thousands Except Per Unit Amounts)
-------------------------------------------------------------------------------------------------------------------
Percent Change
1994 1993 1992 1993-'94 1992-'93
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $ 105,598 $ 107,244 $ 109,598 - 2 - 2
Cost of gas sold . . . . . . . . . . . . . . . 54,465 59,898 59,999 - 9 --
Operations and maintenance expense . . . . . . 21,516 20,880 19,976 + 3 + 5
Depreciation and amortization . . . . . . . . . 7,752 7,511 7,184 + 3 + 5
-------------------------------------------------------------------------------------------------------------------
Operating profit . . . . . . . . . . . . . . . $ 21,865 $ 18,955 $ 22,439 + 15 - 16
===================================================================================================================
OPERATING DATA:
Degree days (*) . . . . . . . . . . . . . . . . 10,291 9,382 10,653 + 10 - 12
Volumes (Bcf):
Gas sold . . . . . . . . . . . . . . . . . . 31.3 28.9 30.9 + 8 - 6
Gas transported . . . . . . . . . . . . . . 12.8 11.3 10.2 + 13 + 11
Combined . . . . . . . . . . . . . . . . . . 44.1 40.2 41.1 + 10 - 2
Margins ($ per Mcf):
Gas sold . . . . . . . . . . . . . . . . . . 1.49 1.49 1.47 -- + 1
Gas transported . . . . . . . . . . . . . . 0.35 0.36 0.40 - 3 - 10
Combined . . . . . . . . . . . . . . . . . . 1.16 1.17 1.20 - 1 - 2
Year-end customers . . . . . . . . . . . . . . 90,100 88,200 86,400 + 2 + 2
===================================================================================================================
</TABLE>
(*) A measure of weather severity calculated by subtracting the mean temperature
for each day from 65 degrees Fahrenheit. More degree days equate to
colder weather.
================================================================================
1994 RESULTS COMPARED TO 1993
--------------------------------------------------------------------------------
Operating profit of the Alaska transmission and distribution segment
(ENSTAR Natural Gas Company, a division of the Company, and Alaska Pipeline
Company, a wholly owned subsidiary, (collectively referred to herein as "ENSTAR
Alaska")) for the year ended December 31, 1994 increased from 1993 primarily
due to higher non-power customer demand due to an increase in customers for the
period and colder weather during 1994.
================================================================================
1993 RESULTS COMPARED TO 1992
--------------------------------------------------------------------------------
Operating profit of ENSTAR Alaska for the year ended December 31, 1993
declined from 1992 primarily due to unusually warm weather in the utility's
market area.
Future operating profit for this segment will be affected by weather,
regulatory action and customer growth in ENSTAR Alaska's service area. The
Company expects customer growth to continue to be relatively modest. During the
1994 summer construction season, approximately 46 miles of new distribution
pipeline were installed to connect some 1,900 new customers.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
OTHER (INCOME) EXPENSE
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Percent Change
1994 1993 1992 1993-'94 1992-'93
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
General and administrative . . . . . . . . . . . $ 10,252 $ 11,666 $ 10,099 - 12 + 16
Interest expense . . . . . . . . . . . . . . . . 51,550 36,753 17,574 + 40 + 109
Interest income and other . . . . . . . . . . . (667) (5,708) (4,705) - 88 + 21
-------------------------------------------------------------------------------------------------------------------
$ 61,135 $ 42,711 $ 22,968 + 43 + 86
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
26
<PAGE> 9
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1994 RESULTS COMPARED TO 1993
--------------------------------------------------------------------------------
General and administrative expenses represent various overhead costs of
corporate departments. All overhead expenses directly related to the operations
of the Company's business segments are included in operations and maintenance
costs and exploration charges. General and administrative expenses decreased
12% from 1993 to 1994 primarily as a result of costs associated with three
compensation plans, one for outside directors, one for key managers, and the
other for all Seagull employees, that are tied directly to the price of the
Common Stock, partially offset by increases in costs related to potential
acquisitions which were not consummated. The closing price of the Common Stock
decreased from $25.375 at December 31, 1993 to $19.125 at December 31, 1994.
Interest expense increased for the year ended December 31, 1994 compared
to 1993 as a result of an increase in the level of debt outstanding due
primarily to new debt incurred in early 1994 to finance the Seagull Canada
Acquisition and secondarily to the steady increase in the short-term interest
rates during the year. Seagull expects its interest costs to increase again in
1995 due to the effect of these higher interest rates for the entire year.
Interest income and other for 1994 includes approximately $2.0 million
relating to costs incurred in gaining shareholder approval to create the ENSTAR
Alaska Stock. Interest income and other for 1993 includes a pre-tax gain of
approximately $3.8 million relating to sales of non-strategic oil and gas
producing properties. Net proceeds from the sales totaled approximately $13.0
million, resulting in an after-tax gain of approximately $2.8 million, or $0.08
per share.
================================================================================
1993 RESULTS COMPARED TO 1992
--------------------------------------------------------------------------------
General and administrative expenses increased 16% for the year ended
December 31, 1993 in comparison to 1992 due to costs associated with the three
compensation plans discussed above as well as other payroll related expenses.
The closing price of Common Stock increased from $15.563 (adjusted for Stock
Split) at December 31, 1992 to $25.375 at December 31, 1993. These increases in
1993 versus 1992 were partially offset by a decline in costs related to
potential acquisitions which were not consummated.
During the first quarter of 1992, Seagull incurred approximately
$400,000 in severance expenses (included in general and administrative expenses
and operations and maintenance costs) when the Company reduced its non-Alaskan
workforce by more than 10%. The workforce reduction was primarily a result of
the depressed state of natural gas demand and prices in early 1992, coupled
with a decrease in planned capital spending for 1992.
On December 31, 1992, Seagull incurred additional debt to finance the
Mid-South Acquisition. In addition, a large portion of the Company's
outstanding floating rate debt was refinanced in July 1993 with longer term
debt bearing interest at fixed rates which were somewhat higher than the
floating rates in effect for the debt being replaced. As a result of these
transactions, Seagull's interest expense and overall average interest rate
increased for 1993 compared to 1992.
Interest income and other for the year ended December 31, 1992 includes
$4.6 million relating to the Seismic Litigation Settlement resulting from a
claim made by the Company that certain of the seismic data acquired by it in
connection with its acquisition of HO&M was actually delivered to other
purchasers. In accordance with the settlement agreement, Seagull received a
cash payment in July 1992 of $2.6 million and will receive up to $5 million in
pipeline business accommodations through December 31, 1995. If less than $3
million of business accommodations are realized, the Company will receive a
cash payment in early 1996 equal to the difference between $3 million and the
sum of the business accommodations realized. The $4.6 million in 1992 income
includes the $2.6 million cash payment plus the present value of the $3 million
guaranteed minimum payment for business accommodations less certain expenses.
SEAGULL ENERGY CORPORATION
27
<PAGE> 10
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INCOME TAXES
================================================================================
1994 RESULTS COMPARED TO 1993
--------------------------------------------------------------------------------
The decrease in income taxes for the year ended December 31, 1994 versus
the prior year was primarily the result of lower earnings before income taxes.
Seagull incurred an income tax benefit of $2.3 million for 1994 versus the
income tax expense of $0.3 million that would have resulted using the statutory
federal tax rate of 35% primarily due to the utilization of approximately $5.5
million in Section 29 Credits to reduce its 1994 regular income tax liability.
The Section 29 Credits are allowed for production of fuels derived from
nonconventional sources that are sold to nonrelated parties.
================================================================================
1993 RESULTS COMPARED TO 1992
--------------------------------------------------------------------------------
The Company's effective tax rate of 18.3% for the year ended December
31, 1993 was substantially lower than the statutory federal tax rate of 35%
primarily because Seagull utilized approximately $4.8 million in Section 29
Credits. The effect of utilizing the Section 29 Credits more than offset the
effect of a 1% increase in the federal corporate tax rate from 34% to 35%. The
effect of this rate change was an increase in the Company's 1993 provision for
federal income taxes of approximately $1.3 million.
LIQUIDITY AND CAPITAL RESOURCES
================================================================================
CAPITAL EXPENDITURES
--------------------------------------------------------------------------------
Capital expenditures for the year ended December 31, 1994 as compared to
1993 increased substantially due to the acquisition of Seagull Canada and
significant increases in Seagull's exploration and exploitation activities.
Capital expenditures for 1993 were substantially higher than those for
1992 due to significant increases in Seagull's exploitative activities,
primarily resulting from the large number of prospects acquired in connection
with the Mid-South Acquisition, and the Company's exploratory activities in
response to improvements in prices received and demand for natural gas. The
Company's E&P activities and related capital expenditures were dramatically
reduced in 1992 as a result of unacceptable natural gas prices early in the
year.
Capital expenditures for 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Percent Change
1994 1993 1992 1993-'94 1992-'93
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES:
Exploration and production:
Lease acquisitions . . . . . . . . . . . . . . $ 17,144 $ 7,396 $ 5,396 + 132 + 37
Exploration . . . . . . . . . . . . . . . . . . 35,107 26,824 8,378 + 31 + 220
Development . . . . . . . . . . . . . . . . . . 83,839 63,598 18,341 + 32 + 247
-------------------------------------------------------------------------------------------------------------------
136,090 97,818 32,115 + 39 + 205
Pipeline and marketing . . . . . . . . . . . . . 2,026 2,115 1,622 - 4 + 30
Alaska transmission and distribution . . . . . . 7,626 10,094 9,024 - 24 + 12
Corporate . . . . . . . . . . . . . . . . . . . . 4,510 2,015 890 + 124 + 126
-------------------------------------------------------------------------------------------------------------------
$ 150,252 $ 112,042 $ 43,651 + 34 + 157
===================================================================================================================
ACQUISITIONS, NET OF CASH ACQUIRED:
Exploration and production . . . . . . . . . . . $ 193,859 $ 29,470 $ 391,531 +558 - 92
Pipeline and marketing . . . . . . . . . . . . . - - 10,357 - N/A
-------------------------------------------------------------------------------------------------------------------
$ 193,859 $ 29,470 $ 401,888 + 558 - 93
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
28
<PAGE> 11
CONSOLIDATED FINANCIAL STATEMENTS
In 1993, a four-company exploration group including Seagull was awarded
four production licenses in United Kingdom waters. Those awards, together with
the subsequent purchase of additional interests, gave Seagull interests in four
licenses in U.K. waters totaling 458,798 acres. Seismic studies and other
evaluation activities on the licensed blocks have been ongoing since mid-1993.
During 1994, one well was successfully tested for hydrocarbons, a second
unsuccessful well was completed and a third well was in progress at year-end.
The 1995 drilling program calls for three additional wells to be drilled in the
United Kingdom waters.
Plans for 1995 call for capital expenditures of approximately $122
million, including about $112 million in E&P. Seagull anticipates spending
approximately $49 million for development, $15 million for lease acquisitions
and $48 million will be devoted to exploration. The Company expects to fund
these capital expenditures from internally generated funds but may reduce
capital expenditure levels if economic conditions dictate.
================================================================================
CAPITAL RESOURCES
--------------------------------------------------------------------------------
The growth in the E&P segment over the past seven years has been
accomplished primarily through acquisitions financed initially by bank
borrowings; however, since August 1990, the Company has reduced borrowings
under existing bank facilities by $520 million with net proceeds received from
three separate Common Stock offerings and the July 1993 sale of Senior and
Senior Subordinated Notes, all in underwritten public offerings. See Notes 6
and 9 of Notes to Consolidated Financial Statements beginning on page 35 of
this Annual Report.
In connection with the Mid-South Acquisition, the Company entered into a
credit agreement (the "Credit Agreement") with a group of major U.S. and
international banks (the "Banks"). The Credit Agreement provided for a $150
million term loan, which was repaid in full in February 1993 with the net
proceeds of approximately $164 million from the sale of 5,060,000 shares
(10,120,000 shares after the Stock Split) of Common Stock, and a $475 million
revolving credit line (the "Revolver"). See Notes 2, 6 and 9 of Notes to
Consolidated Financial Statements beginning on page 35 of this Annual Report.
In May 1994, the Company amended the Revolver to, among other things,
(i) increase the maximum commitment from $475 million to $725 million, (ii)
extend the maturity date to December 31, 2000, (iii) adjust certain financial
covenants relating to dividend limitations and permitted leverage ratios and
(iv) adjust the pricing features of the facility.
Under the terms of the Revolver, the commitments thereunder begin to
decline on March 31, 1997 in equal quarterly reductions of $45 million and a
final reduction of $50 million on December 31, 2000. The amount of senior
indebtedness available to the Company under the provisions of the Revolver is
subject to a borrowing base (the "Borrowing Base") based upon the proved
reserves of the Company's E&P segment and the financial performance of the
Company's other business segments. The Borrowing Base is generally determined
annually, but may be redetermined, at the option of either Seagull or the
Banks, one additional time each year, and will be redetermined upon the sale of
certain assets included in the Borrowing Base. At December 31, 1994, the
Borrowing Base was $625 million.
As of February 28, 1995, borrowings outstanding under the Revolver were
$175.0 million, leaving immediately available unused commitments of
approximately $179.5 million, net of outstanding letters of credit of $2.9
million, $100 million of borrowings under the Senior Notes discussed below, the
nominated maximum borrowing availability of $160 million under the Canadian
Credit Agreement discussed below, and $7.6 million in borrowings outstanding
under Seagull's money market facilities discussed below.
In connection with the Seagull Canada Acquisition, Seagull Canada, the
indirect wholly owned subsidiary of Seagull which acquired Novalta, entered
into a new $175 million reducing revolving credit facility (the "Canadian
Credit
SEAGULL ENERGY CORPORATION
29
<PAGE> 12
CONSOLIDATED FINANCIAL STATEMENTS
Agreement") with a group of the Banks or their affiliates. The Canadian Credit
Agreement provides for dual currency borrowings in U.S. and Canadian dollars
with a nominated maximum borrowing availability of $160 million, which may be
increased or decreased by the Company at any time pursuant to provisions of the
Canadian Credit Agreement, up to a maximum commitment of $175 million. The
Canadian Credit Agreement matures on December 31, 2000 and commitments
thereunder begin to decline on March 31, 1997 in equal quarterly reductions of
$10,937,500. The Company also amended the Canadian Credit Agreement in May 1994
for items similar to amendments (ii), (iii) and (iv) to the Revolver noted
above.
Among the restrictive covenants in the Revolver and the Canadian Credit
Agreement, the Company is required to maintain certain financial ratios. At
December 31, 1994, the Company is in compliance with all covenants contained in
these two bank agreements. Subsequent to December 31, 1994, the Company
obtained an amendment from the Banks which modifies one of the financial ratios
that would make it probable that the Company will remain in compliance with
this covenant.
In July 1993, Seagull sold $100 million of senior notes (the "Senior
Notes") and $150 million of senior subordinated notes (the "Senior Subordinated
Notes") (collectively the "Notes"). The Senior Notes bear interest at 7 7/8% per
annum, are not redeemable prior to maturity or subject to any sinking fund and
mature on August 1, 2003. The Senior Subordinated Notes bear interest at 8 5/8%
per annum, are not subject to any sinking fund and mature on August 1, 2005. On
or after August 1, 2000, the Senior Subordinated Notes are redeemable at the
option of the Company, in whole or in part, at redemption prices declining from
102.59% in 2000 to 100.00% in 2003 and thereafter. The Notes were issued at par
and interest is paid semi-annually. Net proceeds from the offering, totaling
approximately $245.0 million, were used to repay borrowings outstanding under
the Revolver.
In addition to the facilities discussed above, Seagull has money market
facilities with two major U.S. banks with a combined maximum commitment of $70
million. These lines of credit bear interest at rates made available by the
banks at their discretion and may be canceled at either Seagull's or the banks'
discretion. The lines are subject to annual renewal.
Management believes that the Company's capital resources will be
sufficient to finance current and forecasted operations. However, the Company
continues to actively pursue potential acquisitions and, depending upon the
size and terms of any such acquisition, additional financing may be required.
================================================================================
ENVIRONMENTAL
--------------------------------------------------------------------------------
To date, compliance with applicable environmental and safety regulations
by the Company has not required any significant capital expenditures or
materially affected its business or earnings. The Company believes it is in
substantial compliance with environmental and safety regulations and foresees
no material expenditures in the future; however, the Company is unable to
predict the impact that compliance with future regulations may have on capital
expenditures, earnings and competitive position.
SEAGULL ENERGY CORPORATION
30
<PAGE> 13
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Amounts)
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Exploration and production . . . . . . . . . . . . . . . . . . $ 262,543 $ 227,437 $ 91,991
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . 39,963 42,484 37,240
Alaska transmission and distribution . . . . . . . . . . . . . 105,598 107,244 109,598
-------------------------------------------------------------------------------------------------------------------
408,104 377,165 238,829
-------------------------------------------------------------------------------------------------------------------
Costs of Operations:
Alaska transmission and distribution cost of gas sold . . . . 54,465 59,898 59,999
Operations and maintenance . . . . . . . . . . . . . . . . . 119,987 107,457 75,811
Exploration charges . . . . . . . . . . . . . . . . . . . . . 26,888 17,265 9,905
Depreciation, depletion and amortization . . . . . . . . . . 144,697 116,556 63,231
-------------------------------------------------------------------------------------------------------------------
346,037 301,176 208,946
-------------------------------------------------------------------------------------------------------------------
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . 62,067 75,989 29,883
Other (Income) Expense:
General and administrative . . . . . . . . . . . . . . . . . 10,252 11,666 10,099
Interest expense . . . . . . . . . . . . . . . . . . . . . . 51,550 36,753 17,574
Interest income and other . . . . . . . . . . . . . . . . . . (667) (5,708) (4,705)
-------------------------------------------------------------------------------------------------------------------
61,135 42,711 22,968
-------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes and Cumulative Effect of
Changes in Accounting Principles . . . . . . . . . . . . . . 932 33,278 6,915
Income Tax Expense (Benefit) . . . . . . . . . . . . . . . . . . . (2,314) 6,080 2,500
-------------------------------------------------------------------------------------------------------------------
Earnings Before Cumulative Effect of Changes in
Accounting Principles . . . . . . . . . . . . . . . . . . . . 3,246 27,198 4,415
Cumulative Effect of Changes in Accounting Principles . . . . . . . - - 2,273
-------------------------------------------------------------------------------------------------------------------
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,246 $ 27,198 $ 6,688
===================================================================================================================
Earnings Per Share:
Earnings before cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.76 $ 0.17
Cumulative effect of changes in accounting principles . . . . - - 0.09
-------------------------------------------------------------------------------------------------------------------
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.76 $ 0.26
===================================================================================================================
Weighted Average Number of Common Shares
Outstanding (in thousands) . . . . . . . . . . . . . . . . . 36,904 35,790 25,583
===================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
SEAGULL ENERGY CORPORATION
31
<PAGE> 14
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,432 $ 5,572
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . 101,346 98,734
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,530 4,382
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . 7,055 6,520
-------------------------------------------------------------------------------------------------------------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,363 115,208
Property, Plant and Equipment - at cost (successful efforts
method for gas and oil properties) . . . . . . . . . . . . . . . . . . . . . 1,592,152 1,278,701
Accumulated Depreciation, Depletion and Amortization . . . . . . . . . . . . . 467,845 345,512
-------------------------------------------------------------------------------------------------------------------
1,124,307 933,189
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,880 69,854
-------------------------------------------------------------------------------------------------------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,299,550 $ 1,118,251
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,315 $ 84,904
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,598 30,134
Prepaid gas and oil sales . . . . . . . . . . . . . . . . . . . . . . . . . . 2,732 7,590
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . 1,549 1,538
-------------------------------------------------------------------------------------------------------------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 133,194 124,166
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,805 459,787
Other Noncurrent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 57,737 66,785
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,713 28,134
Shareholders' Equity:
Common Stock, $.10 par value; authorized 100,000,000 shares;
issued 36,432,514 shares (1994) and 36,378,659 shares (1993) . . . . . . . 3,643 3,638
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 324,820 324,192
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,959 120,713
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . (2,684) -
Less - note receivable from employee stock ownership plan . . . . . . . . . . (5,502) (6,029)
Less - 326,812 shares of Common Stock held in Treasury, at cost . . . . . . . (3,135) (3,135)
-------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 441,101 439,379
Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . .
-------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity . . . . . . . . . . . . . . . . . . $ 1,299,550 $ 1,118,251
===================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
SEAGULL ENERGY CORPORATION
32
<PAGE> 15
<TABLE>
<CAPTION> CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 3,246 $ 27,198 $ 6,688
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Cumulative effect of changes in accounting principles . . - - (2,273)
Depreciation, depletion and amortization . . . . . . . . . 147,713 119,544 65,238
Amortization of deferred financing costs . . . . . . . . . 3,841 4,261 2,927
Deferred income taxes . . . . . . . . . . . . . . . . . . (5,689) 1,050 2,305
Dry hole expense . . . . . . . . . . . . . . . . . . . . . 15,931 10,534 5,232
Gain on sales of property, plant and equipment, net . . . (413) (3,929) (177)
Distributions in excess of earnings from equity investments 1,609 1,506 872
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 527 598 556
-------------------------------------------------------------------------------------------------------------------
166,765 160,762 81,368
Changes in operating assets and liabilities,
net of acquisitions:
Decrease (Increase) in accounts receivable . . . . . . 8,204 (7,029) 5,039
Decrease (Increase) in inventories, prepaid
expenses and other . . . . . . . . . . . . . . . . . . 5,217 757 (457)
Increase (Decrease) in accounts payable . . . . . . . . 5,360 (16,292) (11,334)
Decrease in prepaid gas and oil sales . . . . . . . . . (7,591) (27,933) -
Increase (Decrease) in accrued expenses and other . . . (7,030) 9,496 (2,429)
-------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities . . . . . . 170,925 119,761 72,187
INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . . . . . . . . . (150,252) (112,042) (43,651)
Acquisitions, net of cash acquired . . . . . . . . . . . . . (193,859) (29,470) (401,888)
Proceeds from sales of property, plant and equipment . . . . 762 13,428 1,347
-------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities . . . . . . . . (343,349) (128,084) (444,192)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and other borrowings. 753,138 599,490 756,500
Principal payments on revolving lines of credit
and other borrowings . . . . . . . . . . . . . . . . . . . (582,827) (750,039) (369,877)
Fees paid to acquire financing . . . . . . . . . . . . . . . (52) (6,535) (18,282)
Proceeds from sales of common stock . . . . . . . . . . . . . 473 166,140 794
Purchase of treasury stock . . . . . . . . . . . . . . . . . - - (210)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 911 957 765
-------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities . . . . . . 171,643 10,013 369,690
-------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . 1,641 - -
-------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents . . . 860 1,690 (2,315)
Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . 5,572 3,882 6,197
-------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . $ 6,432 $ 5,572 $ 3,882
===================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
SEAGULL ENERGY CORPORATION
33
<PAGE> 16
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Foreign
Additional Currency Note
Common Paid-in Retained Translation Receivable Treasury
Stock Capital Earnings Adjustment From ESOP Stock Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1992 . . . . . . . . . $ 1,293 $157,546 $ 86,827 $ - $ (6,944) $ (2,925) $235,797
Net earnings . . . . . . . - - 6,688 - - - 6,688
Purchase of treasury stock,
9,438 shares . . . . . . - - - - - (210) (210)
Exercise of stock
options, 50,235 shares . 5 789 - - - - 794
Repayment of note
receivable by ESOP . . . - - - - 436 - 436
Other . . . . . . . . . . - 168 - - - - 168
-------------------------------------------------------------------------------------------------------------------
December 31, 1992 . . . . . . . . 1,298 158,503 93,515 - (6,508) (3,135) 243,673
Net earnings . . . . . . . - - 27,198 - - - 27,198
Issuance of common stock,
5,060,000 shares . . . . 506 163,131 - - - - 163,637
Two-for-one stock split . . 1,807 (1,807) - - - - -
Exercise of stock
options, 271,645 shares . 27 2,476 - - - - 2,503
Repayment of note
receivable by ESOP . . . - - - - 479 - 479
Other . . . . . . . . . . - 1,889 - - - - 1,889
-------------------------------------------------------------------------------------------------------------------
December 31, 1993 . . . . . . . . 3,638 324,192 120,713 - (6,029) (3,135) 439,379
Net earnings . . . . . . . - - 3,246 - - - 3,246
Exercise of stock
options, 53,855 shares . 5 468 - - - - 473
Foreign currency
translation adjustment . - - - (2,684) - - (2,684)
Repayment of note
receivable by ESOP . . . - - - - 527 - 527
Other . . . . . . . . . . - 160 - - - - 160
-------------------------------------------------------------------------------------------------------------------
December 31, 1994 . . . . . . . . $ 3,643 $324,820 $ 123,959 $ (2,684) $ (5,502) $ (3,135) $441,101
===================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
SEAGULL ENERGY CORPORATION
34
<PAGE> 17
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C> <C>
1. Summary of Significant Accounting Policies . . . . . . . . . . 35
2. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . 37
3. Property, Plant and Equipment . . . . . . . . . . . . . . . . 39
4. Supplemental Gas and Oil Producing Activities (Unaudited) . . 40
5. Other Noncurrent Assets . . . . . . . . . . . . . . . . . . . 44
6. Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . 46
7. Other Noncurrent Liabilities . . . . . . . . . . . . . . . . . 49
8. Fair Value of Financial Instruments . . . . . . . . . . . . . 50
9. Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . 51
10. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 52
11. Interest Income and Other . . . . . . . . . . . . . . . . . . 55
12. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 56
13. Business Segments . . . . . . . . . . . . . . . . . . . . . . 59
14. Selected Quarterly Financial Data (Unaudited) . . . . . . . . 60
15. Commitments and Contingencies . . . . . . . . . . . . . . . . 60
</TABLE>
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
CONSOLIDATION.
--------------------------------------------------------------------------------
The accompanying consolidated financial statements include the accounts
of Seagull Energy Corporation and Subsidiaries (the "Company" or "Seagull"),
all of which are wholly owned. All significant intercompany transactions have
been eliminated.
The results of operations of Seagull Energy Canada Ltd. ("Seagull
Canada"), formerly Novalta Resources Inc. ("Novalta"), have been included with
those of the Company since January 4, 1994 and the results of operations of
Seagull Mid-South Inc. ("Seagull Mid-South"), formerly Arkla Exploration
Company ("Arkla Exploration"), have been included with those of the Company
since December 31, 1992, the respective acquisition dates (See Note 2).
Partnerships in which Seagull holds a 50% interest or less are accounted
for using the equity method.
================================================================================
REGULATION.
--------------------------------------------------------------------------------
The Company operates in Alaska through ENSTAR Natural Gas Company
("ENG"), a division of the Company, and Alaska Pipeline Company ("APC"), a
wholly owned subsidiary (collectively referred to herein as "ENSTAR Alaska").
ENSTAR Alaska is subject to regulation by the Alaska Public Utilities
Commission ("APUC"), which has jurisdiction over, among other things, rates,
accounting procedures and standards of service.
================================================================================
CASH EQUIVALENTS.
--------------------------------------------------------------------------------
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Supplemental
disclosures of cash flow information are shown below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993 1992
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest, net of amount capitalized . . . . . . . . . . . . . . . . . $ 44,914 $ 26,753 $ 19,079
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,621 7,140 878
==================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
35
<PAGE> 18
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
INVENTORIES.
--------------------------------------------------------------------------------
Materials and supplies are valued at the lower of average cost or market
value (net realizable value). Inventories of hydrocarbon products are valued on
a first-in, first-out (FIFO) basis at the lower of cost or market value.
================================================================================
GAS AND OIL PROPERTIES.
--------------------------------------------------------------------------------
The Company uses the successful efforts method of accounting for its gas
and oil operations. The costs of unproved leaseholds are capitalized pending
the results of exploration efforts. Unproved leaseholds with significant
acquisition costs are assessed periodically, on a property-by-property basis,
and a loss is recognized to the extent, if any, that the cost of the property
has been impaired. Unproved leaseholds whose acquisition costs are not
individually significant are aggregated, and the portion of such costs
estimated to ultimately prove nonproductive, based on experience, is amortized
over an average holding period. As unproved leaseholds are determined to be
productive, the related costs are transferred to proved leaseholds. Exploratory
dry holes and geological and geophysical charges are expensed. Depletion of
proved leaseholds and amortization and depreciation of the costs of all
development and successful exploratory drilling are provided by the
unit-of-production method based upon estimates of proved gas and oil reserves
on a depletable unit basis. Estimated costs (net of salvage value) of
dismantling and abandoning gas and oil production facilities are computed and
included in depreciation and depletion using the unit-of-production method. The
total estimated future dismantlement and abandonment cost being amortized as of
December 31, 1994 was approximately $23.8 million. On a world-wide basis,
should the net capitalized costs exceed the estimated future undiscounted after
tax net cash flows from proved gas and oil reserves, such excess costs would be
charged to expense. The estimates of future undiscounted after tax net cash
flows are computed by applying appropriate year-end prices for gas and oil to
estimated future production of proved gas and oil reserves over the economic
lives of the reserves and assuming continuation of existing economic
conditions.
================================================================================
OTHER PROPERTY, PLANT AND EQUIPMENT.
--------------------------------------------------------------------------------
Depreciation of gas gathering pipeline facilities is computed
principally using the unit-of-production method based on the estimated proved
reserves to be transported through the pipeline facility. Depreciation of the
utility plant, gas processing plants and other property is computed using the
straight-line method over their estimated useful lives, which vary from 3 to 33
years.
Utility plant facilities are subject to APUC regulation. When utility
properties are disposed of or otherwise retired, the original cost of the
property, plus cost of retirement, less salvage value, is charged to
accumulated depreciation. Gain or loss on sale or disposition of non-utility
property is credited or charged to interest income and other.
Maintenance, repairs and renewals are charged to operations and
maintenance expense except that renewals which extend the life of the property
are capitalized.
================================================================================
TREASURY STOCK.
--------------------------------------------------------------------------------
The Company follows the cost method of accounting for treasury stock
transactions.
================================================================================
REVENUE RECOGNITION.
--------------------------------------------------------------------------------
The Company records revenue following the entitlement method of
accounting for production gas imbalances.
Seagull constructs pipeline systems for third parties and recognizes
profits on construction under the percentage-of-completion method.
ENSTAR Alaska's operating revenues are based on rates authorized by the
APUC which are applied to customers' consumption of natural gas. ENSTAR Alaska
records unbilled revenue, including amounts to be billed under a purchased gas
adjustment clause, at the end of each accounting period.
================================================================================
GENERAL AND ADMINISTRATIVE EXPENSE.
--------------------------------------------------------------------------------
General and administrative expenses represent various overhead costs of
corporate departments. All overhead expenses directly related to the operations
of the Company's business segments are included in operations and maintenance
expenses and exploration charges.
================================================================================
INTEREST RATE SWAP AGREEMENTS.
--------------------------------------------------------------------------------
The Company has entered into interest rate swap agreements to manage the
impact of changes
SEAGULL ENERGY CORPORATION
36
<PAGE> 19
CONSOLIDATED FINANCIAL STATEMENTS
in interest rates. The differential interest to be paid or received is accrued
as interest rates change and is recognized over the life of the agreements as a
component of interest expense.
================================================================================
INCOME TAXES.
--------------------------------------------------------------------------------
The Company uses the liability method of accounting for income taxes
under which deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as part of the
provision for income taxes in the period that includes the enactment date.
================================================================================
FOREIGN CURRENCY TRANSLATION.
--------------------------------------------------------------------------------
The functional currency for the Company's foreign operations is the
applicable local currency. Translation from applicable foreign currencies to U.
S. dollars is performed for balance sheet accounts using current exchange rates
in effect at the balance sheet date and for revenue and expense accounts using
primarily a weighted average exchange rate during the period. Adjustments
resulting from such translation are included as a separate component of
shareholders' equity. Deferred income taxes have not been provided on
translation adjustments because the unremitted earnings from Seagull's foreign
operations are considered to be permanently invested.
================================================================================
EARNINGS PER SHARE.
--------------------------------------------------------------------------------
The weighted average number of common shares outstanding for the
computation of earnings per share for the years ended December 31, 1994 and
1993 gives effect to the assumed exercise of dilutive stock options as of the
beginning of the year. The effect of dilutive stock options is insignificant on
the earnings per share computation for the year ended December 31, 1992.
On June 4, 1993, Seagull effected, in the form of a 100 percent stock
dividend, a two-for-one stock split (the "Stock Split") of all the issued
shares of the Company's common stock ("Common Stock"). The weighted average
number of common shares outstanding and per share amounts for all periods have
been restated to reflect the Stock Split. All share amounts included in the
consolidated statements of shareholders' equity as of dates prior to June 4,
1993 were not adjusted to reflect the Stock Split.
================================================================================
CHANGES IN FINANCIAL PRESENTATION.
--------------------------------------------------------------------------------
Certain reclassifications have been made in the 1993 and 1992 financial
statements to conform to the presentation used in 1994.
--------------------------------------------------------------------------------
2. ACQUISITIONS
================================================================================
SEAGULL CANADA.
--------------------------------------------------------------------------------
On January 4, 1994, an indirect wholly owned subsidiary of Seagull
acquired all of the outstanding shares of stock of Novalta and an intercompany
note from Novalta to its parent, Novacor Petrochemicals Ltd. for a purchase
price of approximately $202 million in cash (the "Seagull Canada Acquisition").
Effective as of the January 4, 1994 closing date, Novalta was amalgamated with
Seagull Canada, the indirect subsidiary of Seagull that acquired Novalta. As a
result of the amalgamation, the intercompany note was extinguished. The
acquisition was accounted for as a purchase.
Seagull Canada's assets (the "Seagull Canada Properties") consist
primarily of natural gas and oil reserves and developed and undeveloped lease
acreage concentrated principally in a small number of fields located in
Alberta, Canada. According to reserve estimates prepared as of December 31,
1993 by an independent petroleum engineering firm, the Seagull Canada
Properties had proved reserves totaling 257.4 billion cubic feet ("Bcf") of
natural gas and 2.8 million barrels ("MMbbl") of oil, condensate and natural
gas liquids.
SEAGULL ENERGY CORPORATION
37
<PAGE> 20
CONSOLIDATED FINANCIAL STATEMENTS
Approximately 80 percent of these reserves and 75 percent of Seagull Canada's
total producing wells were concentrated in 16 of 95 total fields. As of
December 31, 1993, the Seagull Canada Properties consisted of lease acreage
holdings including approximately 200,000 net developed acres and approximately
250,000 net undeveloped acres.
In connection with the Seagull Canada Acquisition, the Company entered
into the Canadian Credit Agreement (See Note 6).
The following table presents the unaudited pro forma results of the
combined operations of Seagull and Novalta for the year ended December 31, 1993
as though the acquisition of Novalta had occurred on January 1, 1993, financed
primarily with borrowings under the Canadian Credit Agreement as well as
borrowings under the Revolver (See Note 6). Actual results of Seagull Canada's
operations for the year ended December 31, 1994 are reflected in the
accompanying consolidated financial statements.
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Amount)
---------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 1993
Pro Forma
(Unaudited)
---------------------------------------------------------------------------------------------------------------
<S> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $409,523
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,162
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.62
===============================================================================================================
</TABLE>
================================================================================
SEAGULL MID-SOUTH.
--------------------------------------------------------------------------------
On December 31, 1992, Seagull purchased all of the outstanding capital
stock of Arkla Exploration from NorAm, Inc., formerly Arkla, Inc., for
approximately $393 million in cash. The acquisition was accounted for as a
purchase.
Seagull Mid-South's assets consist almost exclusively of natural gas and
oil reserves and developed and undeveloped lease acreage concentrated
principally in a small number of fields located in Arkansas, Louisiana,
Mississippi, Oklahoma and Texas. Arkla Exploration entered into prepaid gas and
oil sales contracts prior to its acquisition by Seagull. As of December 31,
1992, Seagull Mid-South was obligated to deliver for no future consideration
approximately 13 Bcf of gas and approximately one MMbbl of oil and condensate
pursuant to these contracts over periods expiring January 31, 1994 and June 30,
1995, respectively. As of December 31, 1994, approximately 154 Mbbl ("Mbbl"
represents one thousand barrels of oil) remain to be delivered under these
contracts.
SEAGULL ENERGY CORPORATION
38
<PAGE> 21
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT
The major classes of the Company's property, plant and equipment are shown
below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gas and oil properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,289,540 $ 972,460
Pipeline facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,264 63,019
Gas processing plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,128 15,808
Utility plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223,335 216,883
Equipment and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,885 10,531
-------------------------------------------------------------------------------------------------------------------
$ 1,592,152 $1,278,701
===================================================================================================================
</TABLE>
Interest cost capitalized as property, plant and equipment amounted to
approximately $0.6 million in 1994 and $0.9 million in both 1993 and 1992.
Total depreciation, depletion and amortization related to property, plant and
equipment amounted to approximately $147.7 million, $119.5 million and $65.2
million in 1994, 1993 and 1992, respectively.
SEAGULL ENERGY CORPORATION
39
<PAGE> 22
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4. SUPPLEMENTAL GAS AND OIL PRODUCING ACTIVITIES (Unaudited)
<TABLE>
<CAPTION>
CAPITALIZED COSTS RELATING TO GAS AND OIL PRODUCING ACTIVITIES
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
United Other
States Canada(*) International Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994:
Proved properties . . . . . . . . . . . . . . . . . . $ 1,036,494 $ 225,365 $ - $ 1,261,859
Unproved properties . . . . . . . . . . . . . . . . . 19,376 3,216 5,090 27,682
-------------------------------------------------------------------------------------------------------------------
1,055,870 228,581 5,090 1,289,541
Accumulated depreciation, depletion and amortization 332,108 16,098 497 348,703
-------------------------------------------------------------------------------------------------------------------
$ 723,762 $ 212,483 $ 4,593 $ 940,838
===================================================================================================================
December 31, 1993:
Proved properties . . . . . . . . . . . . . . . . . . $ 956,604 $ - $ - $ 956,604
Unproved properties . . . . . . . . . . . . . . . . . 15,178 - 678 15,856
-------------------------------------------------------------------------------------------------------------------
971,782 - 678 972,460
Accumulated depreciation, depletion and amortization 224,437 - 14 224,451
-------------------------------------------------------------------------------------------------------------------
$ 747,345 $ - $ 664 $ 748,009
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
COSTS INCURRED IN GAS AND OIL PROPERTY ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
United Other
States Canada(*) International Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
Acquisition of properties:
Proved . . . . . . . . . . . . . . . . . . . . . . . $ 4,144 $ 218,871 $ - $ 223,015
Unproved . . . . . . . . . . . . . . . . . . . . . . 5,581 3,216 2,426 11,223
Exploration costs . . . . . . . . . . . . . . . . . . . 28,728 801 5,578 35,107
Development costs . . . . . . . . . . . . . . . . . . . 65,009 18,830 - 83,839
-------------------------------------------------------------------------------------------------------------------
$ 103,462 $ 241,718 $ 8,004 $ 353,184
===================================================================================================================
Year Ended December 31, 1993:
Acquisition of properties:
Proved . . . . . . . . . . . . . . . . . . . . . . . $ 22,568 $ - $ - $ 22,568
Unproved . . . . . . . . . . . . . . . . . . . . . . 7,657 - 93 7,750
Exploration costs . . . . . . . . . . . . . . . . . . . 26,824 - - 26,824
Development costs . . . . . . . . . . . . . . . . . . . 63,598 - - 63,598
-------------------------------------------------------------------------------------------------------------------
$ 120,647 $ - $ 93 $120,740
===================================================================================================================
Year Ended December 31, 1992:
Acquisition of properties:
Proved . . . . . . . . . . . . . . . . . . . . . . . $ 455,970 $ - $ - $455,970
Unproved . . . . . . . . . . . . . . . . . . . . . . 3,078 - - 3,078
Exploration costs . . . . . . . . . . . . . . . . . . . 8,378 - - 8,378
Development costs . . . . . . . . . . . . . . . . . . . 18,341 - - 18,341
-------------------------------------------------------------------------------------------------------------------
$ 485,767 $ - $ - $485,767
===================================================================================================================
</TABLE>
(*) Includes Seagull Canada since January 4, 1994.
SEAGULL ENERGY CORPORATION
40
<PAGE> 23
CONSOLIDATED FINANCIAL STATEMENTS
RESULTS OF OPERATIONS FOR GAS AND OIL PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
United Other
States Canada(1) International Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 225,475 $ 37,068 $ - $ 262,543
Lifting costs:
Lease operating expense . . . . . . . . . . . . . . . 27,948 9,003 - 36,951
Workover expense . . . . . . . . . . . . . . . . . . 2,593 725 - 3,318
Production taxes . . . . . . . . . . . . . . . . . . 8,712 - - 8,712
Transportation expense . . . . . . . . . . . . . . . 9,967 1,712 - 11,679
Ad valorem taxes . . . . . . . . . . . . . . . . . . 3,329 - - 3,329
-------------------------------------------------------------------------------------------------------------------
52,549 11,440 - 63,989
General operating expense . . . . . . . . . . . . . . . 9,779 1,574 - 11,353
Exploration charges . . . . . . . . . . . . . . . . . . 19,617 2,308 4,963 26,888
Depreciation, depletion and amortization . . . . . . . 114,738 16,558 751 132,047
-------------------------------------------------------------------------------------------------------------------
Operating profit (loss) . . . . . . . . . . . . . . . . 28,792 5,188 (5,714) 28,266
Income tax expense(2) . . . . . . . . . . . . . . . . 2,761 2,300 - 5,061
-------------------------------------------------------------------------------------------------------------------
Results of operations from producing activities . . . . $ 26,031 $ 2,888 $ (5,714) $ 23,205
===================================================================================================================
Year Ended December 31, 1993:
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 227,437 $ - $ - $ 227,437
Lifting costs:
Lease operating expense . . . . . . . . . . . . . . . 28,806 - - 28,806
Workover expense . . . . . . . . . . . . . . . . . . 4,249 - - 4,249
Production taxes . . . . . . . . . . . . . . . . . . 9,133 - - 9,133
Transportation expense . . . . . . . . . . . . . . . 7,764 - - 7,764
Ad valorem taxes . . . . . . . . . . . . . . . . . . 3,291 - - 3,291
-------------------------------------------------------------------------------------------------------------------
53,243 - - 53,243
General operating expense . . . . . . . . . . . . . . . 10,408 - - 10,408
Exploration charges . . . . . . . . . . . . . . . . . . 16,579 - 686 17,265
Depreciation, depletion and amortization . . . . . . . 103,537 - 15 103,552
-------------------------------------------------------------------------------------------------------------------
Operating profit (loss) . . . . . . . . . . . . . . . . 43,670 - (701) 42,969
Income tax expense(2) . . . . . . . . . . . . . . . . . 9,241 - - 9,241
-------------------------------------------------------------------------------------------------------------------
Results of operations from producing activities . . . . $ 34,429 $ - $ (701) $ 33,728
===================================================================================================================
Year Ended December 31, 1992:
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 91,991 $ - $ - $ 91,991
Lifting costs:
Lease operating expense. . . . . . . . . . . . . . . 15,334 - - 15,334
Workover expense . . . . . . . . . . . . . . . . . . 2,449 - - 2,449
Production taxes . . . . . . . . . . . . . . . . . . 4,045 - - 4,045
Transportation expense . . . . . . . . . . . . . . . 2,757 - - 2,757
Ad valorem taxes . . . . . . . . . . . . . . . . . . 1,645 - - 1,645
-------------------------------------------------------------------------------------------------------------------
26,230 - - 26,230
General operating expense . . . . . . . . . . . . . . . 4,614 - - 4,614
Exploration charges . . . . . . . . . . . . . . . . . . 9,905 - - 9,905
Depreciation, depletion and amortization. . . . . . . . 52,855 - - 52,855
-------------------------------------------------------------------------------------------------------------------
Operating loss . . . . . . . . . . . . . . . . . . . . . (1,613) - - (1,613)
Income tax benefit(2) . . . . . . . . . . . . . . . . . (584) - - (584)
-------------------------------------------------------------------------------------------------------------------
Results of operations from producing activities . . . $ (1,029) $ - $ - $ (1,029)
===================================================================================================================
</TABLE>
(1) Includes Seagull Canada since January 4, 1994.
(2) Income tax expense (benefit) for United States operations is calculated
by applying the current U.S. effective income tax rate, before the
Internal Revenue Code Section 29 Tax Credits, to operating profit and
reducing the resulting income tax expense by the Section 29 Tax Credits.
Income tax expense for Canada is calculated by applying the current
statutory rate to operating profit. No income tax expense (benefit) is
applied to Other International operations as these operations currently
have no impact on the Company's consolidated tax return.
SEAGULL ENERGY CORPORATION
41
<PAGE> 24
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RESERVE QUANTITY INFORMATION
-------------------------------------------------------------------------------------------------------------------
United States Canada(1) Total
Gas Oil Gas Oil Gas Oil
(MMcf) (Mbbl) (MMcf) (Mbbl) (MMcf) (Mbbl)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1992:
Proved developed and undeveloped reserves:
Beginning of year . . . . . . . . . . 335,121 11,014 - - 335,121 11,014
Purchases of reserves in place . . . 573,526 6,691 - - 573,526 6,691
Sales of reserves in place . . . . . (181) (24) - - (181) (24)
Revisions of previous estimates . . . (5,503) 1,548 - - (5,503) 1,548
Extensions and discoveries . . . . . 19,501 199 - - 19,501 199
Production . . . . . . . . . . . . . (38,137) (1,279) - - (38,137) (1,279)
-------------------------------------------------------------------------------------------------------------------
End of year(2) . . . . . . . . . . . 884,327 18,149 - - 884,327 18,149
===================================================================================================================
Year Ended December 31, 1993:
Proved developed and undeveloped reserves:
Beginning of year . . . . . . . . . . 884,327 18,149 - - 884,327 18,149
Purchases of reserves in place . . . 34,350 198 - - 34,350 198
Sales of reserves in place . . . . . (9,587) (1,554) - - (9,587) (1,554)
Revisions of previous estimates . . . 24,924 (1,281) - - 24,924 (1,281)
Extensions and discoveries . . . . . 83,158 972 - - 83,158 972
Production . . . . . . . . . . . . . (102,025) (1,694) - - (102,025) (1,694)
-------------------------------------------------------------------------------------------------------------------
End of year(2) . . . . . . . . . . . 915,147 14,790 - - 915,147 14,790
===================================================================================================================
Year Ended December 31, 1994:
Proved developed and undeveloped reserves:
Beginning of year . . . . . . . . . . 915,147 14,790 - - 915,147 14,790
Purchases of reserves in place . . . 7,168 67 261,785 2,923 268,953 2,990
Sales of reserves in place . . . . . (923) (17) (2,711) (8) (3,634) (25)
Revisions of previous estimates . . . (61,357) (442) 449 685 (60,908) 243
Extensions and discoveries . . . . . 50,576 331 28,212 878 78,788 1,209
Production . . . . . . . . . . . . . (109,900) (1,421) (19,755) (427) (129,655) (1,848)
-------------------------------------------------------------------------------------------------------------------
End of year(2) . . . . . . . . . . . 800,711 13,308 267,980 4,051 1,068,691 17,359
===================================================================================================================
Proved developed reserves:
December 31, 1991 . . . . . . . . . . 265,987 7,213 - - 265,987 7,213
December 31, 1992 . . . . . . . . . . 675,861 11,552 - - 675,861 11,552
December 31, 1993 . . . . . . . . . . 693,610 9,362 - - 693,610 9,362
December 31, 1994 . . . . . . . . . . 650,371 7,882 243,042 3,587 893,413 11,469
===================================================================================================================
</TABLE>
(1) Includes Seagull Canada since January 4, 1994.
(2) At December 31, 1994, includes approximately 154 Mbbl of oil related to
prepaid oil sales. At December 31, 1993 and 1992, includes approximately
620 MMcf of gas and 529 Mbbl of oil and 13 Bcf of gas and 1,000 Mbbl of
oil, respectively, related to prepaid gas and oil sales.
The reserve volumes are provided by independent petroleum engineers and are
estimates only and should not be construed as being exact quantities. These
reserves may or may not be recovered and may increase or decrease as a result
of future operations of the Company and changes in market conditions. The
Company's standardized measure of discounted future net cash flows and changes
therein as of December 31, 1994, 1993 and 1992 are provided based on the
present value of future net revenues from proved gas and oil reserves also
estimated by the independent petroleum engineers in accordance with
SEAGULL ENERGY CORPORATION
42
<PAGE> 25
CONSOLIDATED FINANCIAL STATEMENTS
guidelines established by the Securities and Exchange Commission. These
estimates were computed by applying appropriate year-end prices for gas and oil
to estimated future production of proved gas and oil reserves over the economic
lives of the reserves and assuming continuation of existing economic
conditions. Year-end 1994 calculations were made utilizing average prices for
natural gas and oil, condensate and natural gas liquids that existed at
December 31, 1994 of $1.68 per Mcf and $14.19 per barrel ("Bbl"), respectively,
for the United States and $1.19 per Mcf and $16.61 per Bbl, respectively, for
Canada. The Company's average prices for natural gas and oil, condensate and
natural gas liquids for the month ended January 31, 1995 were $1.62 per Mcf and
$14.63 per Bbl, respectively, for the United States and $1.01 per Mcf and
$12.96 per Bbl, respectively, for Canada. Income taxes are computed by applying
the statutory federal income tax rate to the net cash inflows relating to
proved gas and oil reserves less the tax bases of the properties involved and
giving effect to any net operating loss carryforwards, tax credits and
allowances relating to such properties.
<TABLE>
<CAPTION>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
United
States Canada(*) Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1994:
Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . $ 1,537,172 $ 386,249 $1,923,421
Future development costs . . . . . . . . . . . . . . . . . . . . . . (175,394) (20,863) (196,257)
Future production costs . . . . . . . . . . . . . . . . . . . . . . (474,545) (114,831) (589,376)
-------------------------------------------------------------------------------------------------------------------
Future net cash flows before income taxes . . . . . . . . . . . . . 887,233 250,555 1,137,788
10% annual discount . . . . . . . . . . . . . . . . . . . . . . . . (354,360) (119,168) (473,528)
-------------------------------------------------------------------------------------------------------------------
Discounted future net cash flows before income taxes . . . . . . . . 532,873 131,387 664,260
Discounted income taxes . . . . . . . . . . . . . . . . . . . . . . (37,348) (41,224) (78,572)
-------------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows . . . . . . $ 495,525 $ 90,163 $ 585,688
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
December 31, 1993:
Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . $ 2,318,243 $ - $2,318,243
Future development costs . . . . . . . . . . . . . . . . . . . . . . (234,494) - (234,494)
Future production costs . . . . . . . . . . . . . . . . . . . . . . (564,915) - (564,915)
-------------------------------------------------------------------------------------------------------------------
Future net cash flows before income taxes . . . . . . . . . . . . . 1,518,834 - 1,518,834
10% annual discount . . . . . . . . . . . . . . . . . . . . . . . . (625,504) - (625,504)
-------------------------------------------------------------------------------------------------------------------
Discounted future net cash flows before income taxes . . . . . . . . 893,330 - 893,330
Discounted income taxes . . . . . . . . . . . . . . . . . . . . . . (165,682) - (165,682)
-------------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows . . . . . . $ 727,648 $ - $ 727,648
===================================================================================================================
</TABLE>
(*) Includes Seagull Canada since January 4, 1994.
SEAGULL ENERGY CORPORATION
43
<PAGE> 26
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PRINCIPAL SOURCES OF CHANGE IN THE STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows, beginning of year . $ 727,648 $ 694,448 $ 289,881
Purchases of reserves in place . . . . . . . . . . . . . . . . . . . . 197,301 28,871 486,048
Sales of reserves in place . . . . . . . . . . . . . . . . . . . . . . (2,932) (13,679) (259)
Revisions of previous quantity estimates less related costs . . . . . . (51,622) 16,660 (4,155)
Extensions and discoveries less related costs . . . . . . . . . . . . . 50,062 87,345 13,760
Net changes in prices and production costs . . . . . . . . . . . . . . (348,609) 28,393 15,790
Development costs incurred during period and
changes in estimated future development costs . . . . . . . . . . . . 66,991 22,248 8,595
Sales of gas and oil produced during period, net of lifting costs . . . (198,554) (174,194) (65,761)
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . 89,333 83,454 35,407
Net change in income taxes . . . . . . . . . . . . . . . . . . . . . . 87,109 (25,591) (75,900)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,039) (20,307) (8,958)
-------------------------------------------------------------------------------------------------------------------
(141,960) 33,200 404,567
-------------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows, end of year . . . . $ 585,688 $ 727,648 $ 694,448
===================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
5. OTHER NONCURRENT ASSETS
Other assets include the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Natural gas imbalances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,350 $ 31,271
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,066 19,007
Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,837 7,377
Acquisition costs - Seagull Canada Acquisition . . . . . . . . . . . . . . . . . . . . - 7,745
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,627 4,454
-------------------------------------------------------------------------------------------------------------------
$ 55,880 $ 69,854
===================================================================================================================
</TABLE>
================================================================================
NATURAL GAS IMBALANCES.
--------------------------------------------------------------------------------
The Company records revenue following the entitlement method of
accounting for production imbalances, in which any excess amount received above
the Company's share is treated as a liability. If less than the Company's
entitlement is received, the underproduction is recorded as an asset. The
Company records revenue from gas marketing sales net of the cost of gas and
third-party delivery fees, with any resulting transportation imbalances
recorded as a current receivable or payable.
SEAGULL ENERGY CORPORATION
44
<PAGE> 27
CONSOLIDATED FINANCIAL STATEMENTS
The Company's natural gas and transportation imbalance assets and liabilities
were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands and Volumes in Bcf)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
AMOUNT VOLUME Amount Volume
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Current . . . . . . . . . . . . . . . . . . . . . . . . $ 8,970 5.7 $ 5,808 3.6
Noncurrent . . . . . . . . . . . . . . . . . . . . . . 26,350 17.5 31,271 20.9
-------------------------------------------------------------------------------------------------------------------
$ 35,320 23.2 $ 37,079 24.5
===================================================================================================================
LIABILITIES:
Current . . . . . . . . . . . . . . . . . . . . . . . . $ 10,130 6.0 $ 7,546 4.5
Noncurrent . . . . . . . . . . . . . . . . . . . . . . 25,607 16.4 31,693 20.7
-------------------------------------------------------------------------------------------------------------------
$ 35,737 22.4 $ 39,239 25.2
===================================================================================================================
</TABLE>
================================================================================
DEFERRED FINANCING COSTS.
--------------------------------------------------------------------------------
Deferred financing costs represent financing costs incurred in
connection with the execution of various facilities entered into or securities
issued by the Company. These costs are capitalized and amortized to interest
expense over the life of the related debt. As discussed in Note 6, the Company
has a $725 million revolving credit line which matures in 2000. Financing costs
initially incurred in 1992 of approximately $16.7 million were capitalized in
connection with this facility and will be amortized to interest expense over
periods ending December 31, 2000. Approximately $5.0 million in financing costs
incurred in connection with the Company's July 1993 issuance of $250 million in
senior and senior subordinated notes were capitalized and will be amortized to
interest expense over periods ending August 1, 2005 (See Note 6).
================================================================================
EQUITY INVESTMENTS.
--------------------------------------------------------------------------------
CAVALLO PIPELINE COMPANY. A wholly owned subsidiary of Seagull owns a 50%
interest in, and operates, Cavallo Pipeline Company ("Cavallo"). The Cavallo
system consists of an offshore pipeline system. At December 31, 1994, the
Company's investment in Cavallo amounted to approximately $4.4 million.
The financial position and results of operations of Cavallo are
summarized below. The amounts in the table include interests that are not 100%
attributable to Seagull:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Cavallo
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA (for the year):
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,561 $ 4,737 $ 4,061
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . 3,107 2,624 2,061
BALANCE SHEET DATA (at December 31):
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,059 $ 982 $ 1,175
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,884 10,148 11,412
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 278 163 118
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
45
<PAGE> 28
CONSOLIDATED FINANCIAL STATEMENTS
Seagull's interest in the earnings of Cavallo for the years ended
December 31, 1994, 1993 and 1992 was $1.6 million, $1.9 million and $1.5
million, respectively.
SEAGULL SHORELINE SYSTEM. The Company, through one of its wholly owned
subsidiaries, serves as operator and at December 31, 1994 held approximately a
19% interest in the Seagull Shoreline System ("SSS"), a partnership that owns
an offshore gas pipeline. At December 31, 1994, the Company's investment in SSS
amounted to $1.2 million.
The Company also has a small interest in a corporation engaged in the
exploration for natural gas and oil in Canada acquired in connection with the
Seagull Canada Acquisition.
================================================================================
ACQUISITION COSTS - SEAGULL CANADA ACQUISITION.
--------------------------------------------------------------------------------
Acquisition costs represent costs incurred in connection with the
Seagull Canada Acquisition, including a deposit of approximately $7.5 million
paid in November 1993 which was applied as part of the cash purchase price paid
in January 1994 (See Note 2).
--------------------------------------------------------------------------------
6. LONG-TERM DEBT
Long-term debt for 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Seagull Energy Corporation:
Money market facilities, variable rates (7% and 3.875%-4.75% at December 31, 1994
and 1993, respectively) due in 1995 . . . . . . . . . . . . . . . . . . . . . . $ 6,173 $ 70,000
Revolving credit, variable rates (6.09%-7.4% and 6% at December 31, 1994
and 1993, respectively) due in 1997-2000 . . . . . . . . . . . . . . . . . . . 155,000 77,000
Senior notes, 7.875%, due August 1, 2003 . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
Senior subordinated notes, 8.625%, due August 1, 2005 . . . . . . . . . . . . . . . 150,000 150,000
Seagull Energy Canada Ltd.:
Revolving credit, variable rates (6.94%-8.25% at December 31, 1994)
due in 1997-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,275 -
Alaska Pipeline Company:
Unsecured industrial development bonds:
7.75%-8.00% due in 1994-2008 . . . . . . . . . . . . . . . . . . . . . . . . . 12,035 12,915
Other unsecured indebtedness:
9.95%-12.80% notes, due in 1994-2000 . . . . . . . . . . . . . . . . . . . . . 2,100 2,750
8.15%-8.81% notes, due in 1997-2009 . . . . . . . . . . . . . . . . . . . . . . 50,000 50,000
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 26
-------------------------------------------------------------------------------------------------------------------
623,601 462,691
Less: Current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,549 1,538
Unamortized debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,247 1,366
-------------------------------------------------------------------------------------------------------------------
$ 620,805 $ 459,787
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
46
<PAGE> 29
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
SEAGULL ENERGY CORPORATION.
--------------------------------------------------------------------------------
MONEY MARKET FACILITIES.
Seagull has money market facilities with two major U. S. banks with a
combined maximum commitment of $70 million. These lines of credit bear interest
at rates made available by the banks at their discretion and may be canceled at
either Seagull's or the banks' discretion. The lines are subject to annual
renewal.
SEAGULL ENERGY CORPORATION REVOLVING CREDIT.
During 1994, the Company amended its revolving credit facility (the
"Revolver") with a group of major U. S. and international banks (the "Banks")
to, among other things (i) increase the maximum commitment from $475 million to
$725 million, (ii) extend the maturity date to December 31, 2000, (iii) adjust
certain financial covenants relating to dividend limitations and permitted
leverage ratios and (iv) adjust the pricing features of the credit facility.
Under the terms of the Revolver, the commitments thereunder begin to decline on
March 31, 1997 in equal quarterly reductions of $45 million and a final
reduction of $50 million on December 31, 2000.
The Revolver is an unsecured credit facility that contains restrictive
provisions regarding the incurrence of additional debt, the making of
investments outside existing lines of business, the maintenance of certain
financial ratios (based upon Seagull's consolidated financial condition and
results of operations), the incurrence of additional liens, the declaration or
payment of dividends (other than dividends payable on up to $150 million of
preferred stock or dividends payable solely in the form of additional shares of
Common Stock) and the repurchase or redemption of capital stock. Under the most
restrictive of these provisions, approximately $27.5 million was available for
payment of cash dividends on Common Stock or to repurchase Common Stock as of
December 31, 1994. Subsequent to December 31, 1994, the Company has obtained an
amendment from the Banks which modifies certain of the financial ratios
discussed above. The Revolver also includes restrictive provisions whereby a
change in control of the Company would constitute an Event of Default thereby
accelerating all amounts due under the Revolver.
The Revolver bears interest, at Seagull's option, at a rate equal to (i)
either one, two, three or six month Adjusted LIBOR, plus a margin (the "LIBOR
Margin"), (ii) the Reference Rate, plus a margin (the "Prime Margin") or (iii)
a competitive bid rate. The "Reference Rate" is the greater of (i) 0.5% per
annum above the daily federal funds rate or (ii) the prime rate of the agent
bank. The LIBOR Margin ranges from 0.625% to 1.5% per annum, depending upon
Seagull's credit rating and consolidated Debt to Capitalization Ratio (as
defined under the Revolver), and the Prime Margin ranges from 0% to 0.5% per
annum, depending upon the same factors.
Under provisions included in the Revolver, the amount of senior
indebtedness available to the Company is subject to a borrowing base (the
"Borrowing Base"), based upon the proved reserves of the Company's exploration
and production segment and the financial performance of the Company's other
business segments. The Borrowing Base is generally determined annually, but may
be redetermined, at the option of either Seagull or the Banks, one additional
time each year, and will be redetermined upon the sale of certain assets
included in the Borrowing Base. If the Borrowing Base is redetermined in such a
manner that the amount outstanding under the Revolver (together with any other
permitted senior debt facility) exceeds the new Borrowing Base, then the
Company must repay the Revolver or such other indebtedness in an amount
necessary to cure the deficiency. If such deficiency has not been cured within
30 days, such deficiency must be cured in three equal quarterly installments.
As of December 31, 1994, the available commitment under the Revolver is
subject to a $625 million Borrowing Base and is determined after consideration
of outstanding borrowings under Seagull's other senior debt facilities. On that
date, borrowings outstanding under the Revolver were $155 million, leaving
immediately available unused commitments of approximately $201.6 million, net
of outstanding
SEAGULL ENERGY CORPORATION
47
<PAGE> 30
CONSOLIDATED FINANCIAL STATEMENTS
letters of credit of $2.2 million, $100 million of borrowings outstanding under
the Senior Notes (defined below), the nominated maximum borrowing availability
of $160 million under the Canadian Credit Agreement (defined below), and $6.2
million in borrowings outstanding under Seagull's money market facilities.
SENIOR AND SENIOR SUBORDINATED NOTES.
In July 1993, Seagull sold $100 million of senior notes (the "Senior
Notes") and $150 million of senior subordinated notes (the "Senior Subordinated
Notes") (collectively the "Notes") in an underwritten public offering. The
Senior Notes bear interest at 7 7/8% per annum, are not redeemable prior to
maturity or subject to any sinking fund and mature on August 1, 2003. The
Senior Subordinated Notes bear interest at 8 5/8% per annum, are not subject to
any sinking fund and mature on August 1, 2005. On or after August 1, 2000, the
Senior Subordinated Notes are redeemable at the option of the Company, in whole
or in part, at redemption prices declining from 102.59% in 2000 to 100.00% in
2003 and thereafter (expressed as a percentage of principal amount), plus
accrued interest to the redemption date. The Notes were issued at par
and interest is paid semiannually.
The Notes represent unsecured obligations of the Company. The Senior
Notes rank pari passu with senior indebtedness of the Company while the Senior
Subordinated Notes are subordinate in right of payment to all existing and
future senior indebtedness of the Company. The Notes contain conditions and
restrictive provisions including, among other things, restrictions on
additional indebtedness by the Company and by its subsidiaries, the right of
each note holder to have the notes repurchased by the Company at 101% of the
principal amount upon a change in control, as well as restrictions on the
incurrence of secured debt and entering into sale and leaseback transactions.
Net proceeds from the offering, totaling approximately $245.0 million, were
used to repay borrowings outstanding under the Revolver.
INTEREST RATE SWAP AGREEMENTS.
The Company enters into interest rate swap agreements to manage the impact of
changes in interest rates. During 1994, the following interest rate swap
agreements were in effect:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Notional Effective Maturity Interest Rate
Amount Date Date Receive Pay
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$40,000 9/11/92 9/11/95 Floating 6.76%
20,000 9/16/92 9/16/94 Floating 6.265%
25,000 9/11/92 9/11/94 Floating 6.265%
50,000 8/2/93 7/31/98 5.635% Floating
50,000 8/2/93 7/31/97 5.43% Floating
50,000 8/2/93 7/31/96 5.199% Floating
===================================================================================================================
</TABLE>
While notional amounts are used to express the volume of the interest
rate swap transactions discussed above, the amount potentially subject to
credit risk, in the event of nonperformance by Seagull's counterparties, is
significantly smaller. For the year ended December 31, 1994, interest expense
included approximately $2.3 million net expense relating to these
agreements.
================================================================================
SEAGULL ENERGY CANADA LTD.
--------------------------------------------------------------------------------
In connection with the Seagull Canada Acquisition (See Note 2), Seagull
Canada entered into a $175 million reducing revolving credit facility (the
"Canadian Credit Agreement") with a group of the Banks or their affiliates. The
Canadian Credit Agreement provides for dual currency borrowings in U. S. and
Canadian dollars with a nominated maximum borrowing availability of $160
million, which may be increased or decreased by the Company at any time
pursuant to provisions of the Canadian Credit Agreement, up to a maximum
commitment of $175
SEAGULL ENERGY CORPORATION
48
<PAGE> 31
CONSOLIDATED FINANCIAL STATEMENTS
million. The Canadian Credit Agreement matures on December 31, 2000 and
commitments thereunder begin to decline on March 31, 1997 in equal quarterly
reductions of $10,937,500.
Borrowings outstanding in Canadian dollars bear interest, at Seagull
Canada's option, at a rate equal to (i) either one, two, three or six month
Bankers' Acceptance Rate plus the LIBOR Margin or (ii) the Paying Agent's prime
rate plus the Prime Margin. Borrowings outstanding under the Canadian Credit
Agreement funded in U. S. dollars bear interest, at Seagull Canada's option, in
a manner similar to borrowings outstanding under the Revolver as described
above. The Canadian Credit Agreement is an unsecured credit facility guaranteed
by Seagull and contains restrictive provisions similar to those included in the
Revolver.
================================================================================
ALASKA PIPELINE COMPANY.
--------------------------------------------------------------------------------
All long-term debt of ENSTAR Alaska is issued by APC. The majority of
the capital requirements of ENG are met by loans from APC pursuant to
intercompany notes secured by a mortgage on the properties, rights and
franchises (other than certain excepted properties) of ENG. The senior
unsecured notes of APC provide for restrictions on dividends, additional
borrowings and purchases, redemptions or retirements of shares of capital
stock, other than in stock of APC. Under the most restrictive provisions of
these financing arrangements, approximately $10.4 million was available for the
making of restricted investments, restricted stock payments and restricted
subordinated debt payments as of December 31, 1994.
================================================================================
ANNUAL MATURITIES.
--------------------------------------------------------------------------------
At December 31, 1994, the Company's aggregate annual maturities of long-term
debt are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Year Ending December 31,
-------------------------------------------------------------------------------------------------------------------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,549
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,564
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,602
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,847
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,897
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494,142
===================================================================================================================
</TABLE>
For purposes of the above table, the required payments related to the money
market facilities are considered to be funded with amounts available under the
Revolver.
--------------------------------------------------------------------------------
7. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities include the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Natural gas imbalances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,607 $ 31,693
Refundable customer advances for construction . . . . . . . . . . . . . . . . . . . . . 12,668 11,623
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,462 23,469
-------------------------------------------------------------------------------------------------------------------
$ 57,737 $ 66,785
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
49
<PAGE> 32
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NATURAL GAS IMBALANCES.
--------------------------------------------------------------------------------
This represents revenues for natural gas production received and sold by
the Company in excess of the Company's ownership percentage of total gas
production (See Note 5).
================================================================================
REFUNDABLE CUSTOMER ADVANCES FOR CONSTRUCTION.
--------------------------------------------------------------------------------
This represents customer deposits received by ENSTAR Alaska for
construction of main extensions refundable either wholly or in part over a
period not to exceed 10 years.
--------------------------------------------------------------------------------
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are summarized
as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
December 31,
1994 1993
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 6,432 $ 6,432 $ 5,572 $ 5,572
Liabilities:
Customer deposits . . . . . . . . . . . . . . . . . . . . (1,639) (1,513) (1,672) (1,571)
Refundable customer advances for construction . . . . . . (12,927) (10,144) (11,983) (9,858)
Long-term debt:
Revolver and money market facilities . . . . . . . . (161,173) (161,173) (147,000) (147,000)
Senior Notes . . . . . . . . . . . . . . . . . . . . (100,000) (89,000) (100,000) (99,500)
Senior Subordinated Notes . . . . . . . . . . . . . (150,000) (130,500) (150,000) (149,250)
Seagull Energy Canada Ltd. Revolver . . . . . . . . (148,275) (148,275) - -
Alaska Pipeline Company, including current maturities (62,906) (63,700) (64,325) (75,800)
Interest rate swap agreements:
In a receivable position . . . . . . . . . . . . . . . . - 138 - 1,986
In a payable position . . . . . . . . . . . . . . . . . . - (11,541) - (2,709)
===================================================================================================================
</TABLE>
================================================================================
CASH AND CASH EQUIVALENTS.
--------------------------------------------------------------------------------
The carrying amount approximates fair value because of the short
maturity of these instruments.
================================================================================
CUSTOMER DEPOSITS AND REFUNDABLE CUSTOMER ADVANCES FOR CONSTRUCTION.
--------------------------------------------------------------------------------
The fair value is based on discounted cash flow analyses utilizing a
discount rate of 7.75% and 6% at December 31, 1994 and 1993, respectively, with
monthly payments ratably over the estimated period of deposit or advance
refunding.
================================================================================
LONG-TERM DEBT.
--------------------------------------------------------------------------------
SEAGULL ENERGY CORPORATION: The carrying amount of borrowings
outstanding under the Company's Revolver and money market facilities
approximates fair value because these instruments bear interest at rates tied
to current market rates.
The fair value of Seagull's Senior and Senior Subordinated Notes is
estimated based on quoted market prices for the same issues.
SEAGULL ENERGY CANADA LTD.: The carrying amount of borrowings
outstanding under the Canadian Credit Agreement approximates fair value because
this instrument bears interest at rates tied to current market rates.
ALASKA PIPELINE COMPANY: The fair value of APC's long-term debt is
estimated based on quoted market prices for the same or similar issues.
================================================================================
INTEREST RATE SWAP AGREEMENTS.
--------------------------------------------------------------------------------
The fair values are obtained from the financial institutions that are
counterparties to the transac-
SEAGULL ENERGY CORPORATION
50
<PAGE> 33
CONSOLIDATED FINANCIAL STATEMENTS
tions. These values represent the estimated amount the Company would pay or
receive to terminate the agreements, taking into consideration current interest
rates and the current creditworthiness of the counterparties. Seagull's
interest rate swap agreements are off balance sheet transactions and,
accordingly, there are no respective carrying amounts for these transactions
included in the accompanying consolidated balance sheets as of December 31,
1994 and 1993.
Fair value estimates are dependent upon subjective assumptions and
involve significant uncertainties resulting in variability in estimates with
changes in assumptions. Also potential taxes and other expenses that would be
incurred in an actual sale or settlement are not reflected in amounts
disclosed.
--------------------------------------------------------------------------------
9. SHAREHOLDERS' EQUITY
================================================================================
COMMON STOCK.
--------------------------------------------------------------------------------
In February 1993, Seagull sold 5,060,000 shares (10,120,000 shares after
the Stock Split) of Common Stock in an underwritten public offering. Net
proceeds from the offering, totaling approximately $163.6 million, were used to
retire debt.
See Note 6 for information concerning restrictions imposed by the
Revolver on the Company's future purchases of Common Stock.
================================================================================
PREFERRED STOCK.
--------------------------------------------------------------------------------
The Company is authorized to issue 5,000,000 shares of preferred stock,
par value $1.00 per share, in one or more series. There were no shares issued
or outstanding as of December 31, 1994 and 1993.
================================================================================
PREFERRED SHARE PURCHASE RIGHTS.
--------------------------------------------------------------------------------
In 1989, Seagull adopted a Share Purchase Rights Plan to protect the
Company's shareholders from coercive or unfair takeover tactics. Under the
Plan, each share of Common Stock outstanding or subsequently issued has
attached to it one Right, exercisable at $32.75 (adjusted for Stock Split),
subject to certain adjustments. Generally, in the event a person or group
acquires 20% or more of the outstanding Common Stock other than pursuant to a
cash tender offer for all shares of such Common Stock (provided that the tender
offer increases the acquiring person's or group's ownership to at least 85% of
the outstanding Common Stock), or in the event the Company is acquired in a
merger or other business combination or 50% or more of the Company's
consolidated assets or earning power is sold, each Right entitles the holder to
purchase shares of Common Stock of the Company or of the acquiring company,
having a value of twice the exercise price. The Rights, under certain
circumstances, are redeemable at the option of Seagull's Board of Directors at
a price of $0.01 per Right, within 10 days (subject to extension) following the
day on which the acquiring person or group exceeds the 20% threshold. The
Rights expire on March 22, 1999.
================================================================================
ENSTAR ALASKA STOCK PROPOSAL.
--------------------------------------------------------------------------------
On June 1, 1994, shareholders approved an amendment to the Company's
articles of incorporation (the "ENSTAR Alaska Stock Proposal") to create and
issue a new class of common stock of the Company intended to reflect separately
the performance of ENSTAR Alaska (the "ENSTAR Alaska Stock"). Subject to
prevailing market and other conditions, the Company is authorized to proceed at
any time with a public offering (the "ENSTAR Alaska Stock Offering") for cash
of shares of ENSTAR Alaska Stock. The Company has not implemented the ENSTAR
Alaska Stock Offering but continues to monitor market conditions. As part of
the ENSTAR Alaska Stock Proposal, and following the issuance of the ENSTAR
Alaska Stock, Seagull's currently outstanding Common Stock would reflect
separately the performance of the Company's exploration and production and
pipeline and marketing segments.
SEAGULL ENERGY CORPORATION
51
<PAGE> 34
CONSOLIDATED FINANCIAL STATEMENTS
Net proceeds from the ENSTAR Alaska Stock Offering would be used to
repay amounts borrowed under the Revolver, none of which is attributable to
ENSTAR Alaska.
--------------------------------------------------------------------------------
10. BENEFIT PLANS
================================================================================
STOCK OPTION PLANS.
--------------------------------------------------------------------------------
The Company currently has six stock option plans: the 1981 Stock Option
Plan; the 1983 Stock Option Plan; the 1986 Stock Option Plan; the 1990 Stock
Option Plan; the 1993 Stock Option Plan and the 1993 Nonemployee Directors'
Stock Option Plan. Twenty percent of (i) all options granted through December
31, 1992, (ii) 100,000 options granted in May 1993, and (iii) all options
granted under the 1993 Nonemployee Directors' Stock Option Plan become
exercisable on a cumulative basis in each of the first five years and expire 10
years after the date of grant. Forty percent of all other options granted after
1992 become exercisable after three years and twenty percent become exercisable
on a cumulative basis in each of the next three years, and the options expire
10 years after the date of grant. The options are granted at the quoted market
value of Seagull's Common Stock on the New York Stock Exchange on the date of
grant. Accordingly, no compensation expense is recognized in the Company's
results of operations relating to these options.
Information relating to stock options is summarized as follows (adjusted
for Stock Split):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
OPTION Option Option
PRICE Price Price
SHARES PER SHARE Shares Per Share Shares Per Share
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance outstanding -
Beginning of year . . . . . . . . 2,159,892 1,862,872 1,366,736
Granted . . . . . . . . . . . 628,500 $ 25.50 615,000 $26.38 711,000 $ 11.94
Exercised . . . . . . . . . . (55,388) $ 6.31 - (304,952) $ 6.31 - (100,664) $ 3.25 -
$ 14.88 $ 14.88 $ 14.88
Canceled . . . . . . . . . . . (40,500) (13,028) (114,200)
-------------------------------------------------------------------------------------------------------------------
Balance outstanding - End of year . . . 2,692,504 $ 6.31 - 2,159,892 $ 6.31 - 1,862,872 $ 6.31 -
$ 26.38 $ 26.38 $ 14.88
-------------------------------------------------------------------------------------------------------------------
Options exercisable - End of year . . . 1,003,970 763,892 764,736
-------------------------------------------------------------------------------------------------------------------
Options available for grant -
End of year . . . . . . . . . . . 842,060 1,430,060 242,104
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
52
<PAGE> 35
CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
DEFINED BENEFIT PLANS.
--------------------------------------------------------------------------------
The Company has an unfunded retirement plan which provides for
supplemental benefits to certain officers and key employees. As of December
31, 1994, only one person was designated to participate in such plan. Total
expenses of the plan were approximately $0.3 million for 1994 and $0.2 million
for both 1993 and 1992. The retirement plan's costs are included in general and
administrative expenses.
ENSTAR Alaska has two defined benefit retirement plans which cover
salaried employees (the "Salaried Retirement Plan") and operating employees
(the "Operating Unit Plan"). Clerical unit personnel, which constitute
approximately 25% of total ENSTAR Alaska personnel, are not covered under a
retirement plan. Determination of benefits for the salaried employees is based
upon a combination of years of service and final monthly compensation. Benefits
for operating employees are based solely on years of service. ENSTAR Alaska's
policy is to fund the minimum contributions required by applicable regulations.
The net pension costs are included in operations and maintenance expenses.
The following table sets forth the ENSTAR Alaska plans' funded status
and the amounts recognized in the consolidated financial statements at December
31, 1994 and 1993:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993
SALARIED OPERATING Salaried Operating
EMPLOYEES EMPLOYEES Employees Employees
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . $ (4,517) $ (2,405) $ (4,756) $ (2,753)
===================================================================================================================
Accumulated benefit obligation . . . . . . . . . . . . . $ (4,582) $ (2,416) $ (4,866) $ (2,773)
===================================================================================================================
Projected benefit obligation for services rendered to date . $ (5,415) $ (2,416) $ (5,921) $ (2,773)
Plan assets at fair value, primarily listed
stocks and corporate and U. S. bonds . . . . . . . . . . 3,818 2,513 4,094 2,790
-------------------------------------------------------------------------------------------------------------------
Plan assets at fair value in excess of (less than)
projected benefit obligation . . . . . . . . . . . . . . (1,597) 97 (1,827) 17
Unrecognized prior service cost . . . . . . . . . . . . . . . 96 17 90 19
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . 121 432 417 632
Unrecognized net obligation (asset) arising out of the
initial application of SFAS No. 87, amortized over 15
years (salaried) and 18 years (operating) . . . . . . . . 655 (92) 748 (101)
Additional minimum liability . . . . . . . . . . . . . . . . (38) - (200) -
-------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost . . . . . . . . . . . . . . . $ (763) $ 454 $ (772) $ 567
===================================================================================================================
Net pension cost includes the following components:
Service cost - benefits earned during the period . . . . $ 226 $ 111 $ 232 $ 110
Interest cost on projected benefit obligation . . . . . . 440 206 413 190
Actual return on plan assets . . . . . . . . . . . . . . 331 198 (333) (224)
Net amortization and deferral . . . . . . . . . . . . . . (559) (402) 147 40
-------------------------------------------------------------------------------------------------------------------
Net periodic pension cost . . . . . . . . . . . . . . . . . . $ 438 $ 113 $ 459 $ 116
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
53
<PAGE> 36
CONSOLIDATED FINANCIAL STATEMENTS
The assumed weighted average discount rate for both ENSTAR Alaska plans
was 8.5% and 7.25% for 1994 and 1993, respectively, and the rate of increase in
future compensation for the Salaried Retirement Plan used in determining the
projected benefit obligation was 5% for 1994 and 1993. The expected long-term
rate of return on plan assets for both ENSTAR Alaska plans was 8% for both 1994
and 1993.
================================================================================
PROFIT SHARING PLANS.
--------------------------------------------------------------------------------
ENSTAR Alaska has trusteed profit sharing plans for salaried employees
and union employees. Annual contributions for each plan are determined by the
Company's Board of Directors pursuant to formulae which contain minimum
contribution requirements. Profit sharing expense was approximately $0.3
million for each of the years 1994, 1993 and 1992, and is included in
operations and maintenance expenses.
================================================================================
THRIFT PLANS.
--------------------------------------------------------------------------------
The Seagull Thrift Plan and the ENSTAR Natural Gas Company Thrift Plan
are qualified employee savings plans in accordance with the provisions of
Section 401(k) of the Internal Revenue Code of 1986, as amended. Seagull
Canada's Retirement Plan and Capital Accumulation Plan are qualified employee
savings plans in accordance with the provisions of the Income Tax Act of
Canada. Company contributions to these four plans (collectively, the "Thrift
Plans") were approximately $1.8 million, $1.3 million and $0.9 million for the
years 1994, 1993 and 1992, respectively. The Thrift Plans' costs are included
in operations and maintenance expenses and general and administrative expenses.
================================================================================
EMPLOYEE STOCK OWNERSHIP PLAN.
--------------------------------------------------------------------------------
On November 15, 1989, the Company formed the Seagull Employee Stock
Ownership Plan (the "ESOP") for the benefit of the non-Alaskan employees of
the Company. The ESOP borrowed from the Company $7.7 million at an interest
rate of 10 percent per annum to be repaid in twelve equal annual installments
of principal and interest. The ESOP used the borrowed funds and the 1989
contributions from the Company to purchase 948,150 shares (adjusted for Stock
Split) of Common Stock at $8.438 per share (adjusted for Stock Split) from
Seagull's treasury. The purchase price was based upon the closing price of the
Common Stock on the New York Stock Exchange on the date the ESOP was formed.
The promissory note has been and will be funded entirely by
contributions from Seagull. Company contributions of approximately $0.5 million
in 1994 and 1993 and $0.4 million in 1992 are included in operations and
maintenance expenses and general and administrative expenses.
================================================================================
POSTRETIREMENT MEDICAL PLAN.
--------------------------------------------------------------------------------
ENSTAR Alaska has a postretirement medical plan which covers all of its
salaried employees. Determination of benefits is based upon the combined age of
the retiree and years of service at retirement. Prior to January 1, 1992,
ENSTAR Alaska accounted for these obligations on a pay-as-you-go basis.
Effective January 1, 1992, the Company adopted SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions. This SFAS changes
the accounting treatment for such benefits from a "pay-as-you-go" basis to a
method where the expected costs for these benefits are accrued during the years
the plan participants render service. Seagull recognized the cumulative effect
of this change in accounting principle in the line item entitled "Cumulative
Effect of Changes in Accounting Principles" in the accompanying consolidated
statement of earnings for the year ended December 31, 1992. Accordingly,
periods prior to January 1, 1992 were not restated to reflect this change.
The cumulative effect of this accounting change as of January 1, 1992,
resulted in a reduction in earnings of $0.7 million (after income taxes of $0.4
million), or $0.03 per share. The effect of this change on earnings before the
cumulative effect for the year ended December 31, 1992 was not material.
Expenses related to the postretirement medical plan of $0.2 million for
each of the years ended December 31, 1994 and 1993 and $0.1 million for 1992
are included in operations and maintenance expenses.
SEAGULL ENERGY CORPORATION
54
<PAGE> 37
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
11. INTEREST INCOME AND OTHER
Interest income and other includes the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 425 $ 454 $ 413
ENSTAR Alaska Stock Proposal costs . . . . . . . . . . . . . . . . . . . . (2,031) - -
Seismic Litigation Settlement . . . . . . . . . . . . . . . . . . . . . . . - - 4,606
Gain on sales of property, plant and equipment, net . . . . . . . . . . . . 413 3,929 177
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,860 1,325 (491)
-------------------------------------------------------------------------------------------------------------------
$ 667 $ 5,708 $ 4,705
===================================================================================================================
</TABLE>
================================================================================
ENSTAR ALASKA STOCK PROPOSAL COSTS.
--------------------------------------------------------------------------------
This represents transaction costs related to the ENSTAR Alaska Stock Proposal
(See Note 9).
================================================================================
SEISMIC LITIGATION SETTLEMENT.
--------------------------------------------------------------------------------
The Seismic Litigation Settlement resulted from a claim made by the
Company that certain of the seismic data acquired by it in connection with its
1988 acquisition of Houston Oil & Minerals Corporation was actually delivered
to other purchasers. In accordance with the settlement agreement, Seagull
received a cash payment in July 1992 of $2.6 million and will receive up to $5
million in pipeline business accommodations through December 31, 1995. If less
than $3 million of business accommodations are realized, the Company will
receive a cash payment in early 1996 equal to the difference between $3 million
and the sum of the business accommodations realized. The $4.6 million in 1992
income includes the $2.6 million cash payment plus the present value of the $3
million guaranteed minimum payment for business accommodations less certain
expenses.
================================================================================
GAIN ON SALES OF PROPERTY, PLANT AND EQUIPMENT, NET.
--------------------------------------------------------------------------------
In 1993, a pre-tax gain of approximately $3.8 million resulted from the
sales of non-strategic gas and oil producing properties. Net proceeds from the
sales totaled approximately $13.0 million, resulting in an after-tax gain of
$2.8 million, or $0.08 per share. The parcels sold had proven reserves
estimated at approximately 19 Bcf of natural gas equivalents.
SEAGULL ENERGY CORPORATION
55
<PAGE> 38
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
12. INCOME TAXES
Total income tax expense (benefit) for the years ended December 31, 1994, 1993
and 1992 was allocated as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit) before cumulative effect of
changes in accounting principles . . . . . . . . . . . . . . . . . . . . $ (2,314) $ 6,080 $ 2,500
Adjustments for certain changes in accounting principles . . . . . . . . . - - (3,473)
Additional paid-in capital for compensation expense for tax purposes in
excess of amounts recognized for financial reporting purposes . . . . . (160) (1,966) (214)
-------------------------------------------------------------------------------------------------------------------
$ (2,474) $ 4,114 $ (1,187)
===================================================================================================================
</TABLE>
The income tax expense (benefit) for each of the years ended December 31, 1994,
1993 and 1992 was as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,651 $ 3,667 $ 131
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 - -
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325 1,363 64
-------------------------------------------------------------------------------------------------------------------
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,375 5,030 195
-------------------------------------------------------------------------------------------------------------------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,655) 1,128 (212)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,256 - -
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (290) (78) 2,517
-------------------------------------------------------------------------------------------------------------------
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,689) 1,050 2,305
-------------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) before cumulative effect of
changes in accounting principles . . . . . . . . . . . . . . . . . . . . $ (2,314) $ 6,080 $ 2,500
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
56
<PAGE> 39
CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted SFAS No. 109, Accounting for Income Taxes, effective
January 1, 1992. Seagull recognized the cumulative effect of this change in
accounting principle in the line item entitled "Cumulative Effect of Changes in
Accounting Principles" in the accompanying consolidated statement of earnings
for the year ended December 31, 1992. Accordingly, periods prior to January 1,
1992 were not restated to reflect this change. The cumulative effect of this
accounting change as of January 1, 1992 resulted in an increase in earnings of
approximately $3.0 million, or $0.12 per share. The effect of this change on
earnings before income taxes for the year ended December 31, 1992 was not
material.
The provision for income taxes before cumulative effect of changes in
accounting principles for each of the years ended December 31, 1994, 1993 and
1992 was different than the amount computed using the federal statutory rate
(35% for 1994 and 1993, 34% for 1992) for the following reasons:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amount computed using the statutory rate . . . . . . . . . . . . . . . . . $ 326 $ 11,647 $ 2,351
Increase (Reduction) in taxes resulting from:
Utilization of Internal Revenue Code Section 29 Credits . . . . . . . . (5,534) (4,773) -
State income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . 673 835 1,703
Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . (380) (859) 1,119
Foreign tax effect - Canada . . . . . . . . . . . . . . . . . . . . . . 2,961 - -
Adjustments to beginning-of-the-year tax bases per the 1992 and 1991
tax returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (657) (1,828)
Increase in the beginning-of-the-year balance of the deferred tax
liabilities due to the increase in the corporate federal income tax rate - 960 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (360) (1,073) (845)
-------------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) before cumulative effect of
changes in accounting principles . . . . . . . . . . . . . . . . . . . $ (2,314) $ 6,080 $ 2,500
===================================================================================================================
</TABLE>
The significant components of deferred income tax expense (benefit)
attributable to income from continuing operations for the years ended December
31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax expense (benefit) (exclusive of the effects of other
components listed below) . . . . . . . . . . . . . . . . . . . . . . . . $ (5,309) $ 949 $ 1,186
Increase (Decrease) in deferred tax asset valuation allowance . . . . . . . (380) (859) 1,119
Increase in the beginning-of-the-year balance of the deferred tax
liabilities due to the increase in the corporate federal income tax rate - 960 -
-------------------------------------------------------------------------------------------------------------------
$ (5,689) $ 1,050 $ 2,305
===================================================================================================================
</TABLE>
SEAGULL ENERGY CORPORATION
57
<PAGE> 40
CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Property, plant and equipment, due to
differences in depreciation, depletion and amortization . . . . . . . $ 63,303 $ 45,296 $ 38,619
Investments in partnership, due to difference in depreciation . . . . . 564 606 1,307
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 509 546
-------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 64,380 46,411 40,472
-------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Minimum tax credit carryforwards . . . . . . . . . . . . . . . . . . . . (14,367) (12,221) (9,065)
Investment tax credit carryforwards . . . . . . . . . . . . . . . . . . (2,274) (2,771) (3,334)
Deferred compensation/retirement related
items accrued for financial reporting purposes . . . . . . . . . . . (3,965) (3,269) (2,263)
Contingent consideration related to acquisitions/dispositions . . . . . (1,052) (604) (1,975)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,690) (3,134) (1,332)
-------------------------------------------------------------------------------------------------------------------
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,348) (21,999) (17,969)
Less - valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . 1,563 1,943 2,802
-------------------------------------------------------------------------------------------------------------------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . (21,785) (20,056) (15,167)
-------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . $ 42,595 $ 26,355 $ 25,305
===================================================================================================================
</TABLE>
For federal income tax purposes, as of December 31, 1994, the Company
has unused investment tax credits of approximately $2.3 million which will
expire in the years 1999 and 2000, and unused minimum tax credits of
approximately $14.4 million which are available over an indefinite period.
SEAGULL ENERGY CORPORATION
58
<PAGE> 41
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
13. BUSINESS SEGMENTS
Information on the Company's operations by business segment is as follows for
the year ended December 31:
<TABLE>
<CAPTION>
(Dollars in Thousands)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Exploration and production . . . . . . . . . . . . . . . . . . . . . $ 262,543 $ 227,437 $ 91,991
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . 39,963 42,484 37,240
Alaska transmission and distribution . . . . . . . . . . . . . . . . 105,598 107,244 109,598
-------------------------------------------------------------------------------------------------------------------
$ 408,104 $ 377,165 $ 238,829
===================================================================================================================
OPERATING PROFIT (LOSS):
Exploration and production . . . . . . . . . . . . . . . . . . . . . $ 28,266 $ 42,969 $ (1,613)
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . 11,936 14,065 9,057
Alaska transmission and distribution . . . . . . . . . . . . . . . . 21,865 18,955 22,439
-------------------------------------------------------------------------------------------------------------------
62,067 75,989 29,883
-------------------------------------------------------------------------------------------------------------------
General and administrative expense . . . . . . . . . . . . . . . . . (10,252) (11,666) (10,099)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (51,550) (36,753) (17,574)
Interest income and other . . . . . . . . . . . . . . . . . . . . . 667 5,708 4,705
-------------------------------------------------------------------------------------------------------------------
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . $ 932 $ 33,278 $ 6,915
===================================================================================================================
OPERATIONS AND MAINTENANCE EXPENSE:
Exploration and production . . . . . . . . . . . . . . . . . . . . . $ 75,342 $ 63,651 $ 30,844
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . 23,129 22,926 24,991
Alaska transmission and distribution . . . . . . . . . . . . . . . . 21,516 20,880 19,976
-------------------------------------------------------------------------------------------------------------------
$ 119,987 $ 107,457 $ 75,811
===================================================================================================================
DEPRECIATION, DEPLETION AND AMORTIZATION:
Exploration and production . . . . . . . . . . . . . . . . . . . . . $ 132,047 $ 103,552 $ 52,855
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . 4,898 5,493 3,192
Alaska transmission and distribution . . . . . . . . . . . . . . . . 7,752 7,511 7,184
-------------------------------------------------------------------------------------------------------------------
$ 144,697 $ 116,556 $ 63,231
===================================================================================================================
IDENTIFIABLE ASSETS:
Exploration and production(*) . . . . . . . . . . . . . . . . . . . $ 1,001,263 $ 816,812 $ 831,222
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . 72,377 70,675 65,378
Alaska transmission and distribution . . . . . . . . . . . . . . . . 190,087 185,701 186,519
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,823 45,063 19,845
-------------------------------------------------------------------------------------------------------------------
$ 1,299,550 $ 1,118,251 $ 1,102,964
===================================================================================================================
CAPITAL EXPENDITURES:
Exploration and production . . . . . . . . . . . . . . . . . . . . . $ 136,090 $ 97,818 $ 32,115
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . 2,026 2,115 1,622
Alaska transmission and distribution . . . . . . . . . . . . . . . . 7,626 10,094 9,024
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,510 2,015 890
-------------------------------------------------------------------------------------------------------------------
$ 150,252 $ 112,042 $ 43,651
===================================================================================================================
ACQUISITIONS, NET OF CASH ACQUIRED:
Exploration and production . . . . . . . . . . . . . . . . . . . . . $ 193,859 $ 29,470 $ 391,531
Pipeline and marketing . . . . . . . . . . . . . . . . . . . . . . . - - 10,357
-------------------------------------------------------------------------------------------------------------------
$ 193,859 $ 29,470 $ 401,888
===================================================================================================================
</TABLE>
(*) Includes identifiable assets related to Canadian operations of $224,655
at December 31, 1994.
SEAGULL ENERGY CORPORATION
59
<PAGE> 42
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data is as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Amounts)
-------------------------------------------------------------------------------------------------------------------
Earnings (Loss)
Revenues Operating Profit Net Earnings (Loss) Per Share(1)
1994 1993 1994 1993 1994 1993 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, . . . . . . . $ 127,063 $ 103,192 $ 34,829 $ 19,421 $ 12,915 $ 3,853 $ 0.35 $ 0.12
June 30, . . . . . . . 99,559 86,973 17,246 15,201 2,581 3,624 0.07 0.10
September 30, . . . . . 81,044 81,790 3,418 17,077 (6,291) 7,273(2) (0.17) 0.20(2)
December 31, . . . . . 100,438 105,210 6,574 24,290 (5,959) 12,448 (0.16) 0.34
-------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . $ 408,104 $ 377,165 $ 62,067 $ 75,989 $ 3,246 $ 27,198 $ 0.09 $ 0.76
===================================================================================================================
</TABLE>
(1) Adjusted for the Stock Split effected June 4, 1993. (See Note 1).
(2) Includes an after-tax gain in the third quarter of 1993 of approximately
$2.7 million, or $0.08 per share, relating to sales of non-strategic gas
and oil producing properties. (See Note 11).
--------------------------------------------------------------------------------
15. COMMITMENTS AND CONTINGENCIES
================================================================================
LEASE COMMITMENTS.
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The Company leases certain office space and equipment under operating
lease arrangements which contain renewal options and escalation clauses. Future
minimum rental payments under these leases range between $1.6 million and $2.6
million in each of the years 1995-1999, and total $8.7 million for all
subsequent years.
Total rental expense under operating leases for 1994, 1993 and 1992 was
approximately $2.8 million, $2.5 million and $2.0 million, respectively.
================================================================================
CONCENTRATIONS OF CREDIT RISK.
--------------------------------------------------------------------------------
The Company operates in all phases of the natural gas industry with
sales to resellers such as pipeline companies and local distribution companies
as well as to end-users such as commercial businesses, industrial concerns and
residential consumers. While certain of these customers are affected by
periodic downturns in the economy in general or in their specific segment of
the natural gas industry, the Company believes that its level of credit-related
losses due to such economic fluctuations has been immaterial and will continue
to be immaterial to the Company's results of operations in the long term.
================================================================================
LITIGATION.
--------------------------------------------------------------------------------
The Company is a party to ongoing litigation in the normal course of
business or other litigation with respect to which the Company is indemnified
pursuant to various purchase agreements or other contractual arrangements.
Management regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters.
While the outcome of lawsuits or other proceedings against the Company cannot
be predicted with certainty, management believes that the effect on its
financial condition or results of operations, if any, will not be material.
SEAGULL ENERGY CORPORATION
60
<PAGE> 43
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
REPORT OF MANAGEMENT TO SHAREHOLDERS
The management of Seagull Energy Corporation is responsible for the
preparation and integrity of financial statements and related data in this
Annual Report, whether audited or unaudited. The financial statements were
prepared in conformity with generally accepted accounting principles and are
not misstated due to material fraud or error. The financial statements include
certain estimates and judgments which management believes are reasonable under
the circumstances. The other information in the Annual Report is consistent
with that in the financial statements.
Management is responsible for and maintains a system of internal
accounting controls that is functioning as intended as of the end of the fiscal
year.
Management believes the system of internal controls is sufficient to
provide reasonable assurance that assets are safeguarded against loss or
unauthorized use and that financial records are reliable for preparing
financial statements, as well as to prevent and detect fraudulent financial
reporting. The internal control system is supported by written policies and
procedures and the employment of trained, qualified personnel. The Company has
an internal auditing staff which reviews the adequacy of the internal
accounting controls and compliance with them. Management has considered the
recommendations of the internal auditing staff and KPMG Peat Marwick LLP
concerning the Company's system of internal controls and has responded
appropriately to those recommendations.
The accompanying consolidated financial statements of Seagull Energy
Corporation and Subsidiaries as of December 31, 1994 have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. Their audits were
made in accordance with generally accepted auditing standards and included a
review of the system of internal controls to the extent considered necessary to
determine the audit procedures required to support their opinion on the
consolidated financial statements. The Auditors' Report appears on page 62.
The Board of Directors, through its Audit Committee composed exclusively
of outside directors, meets periodically with representatives of management,
the internal auditing staff and the independent auditors to ensure the
existence of effective internal accounting controls and to ensure that
financial information is reported accurately and timely with all appropriate
disclosures included. The independent auditors and the internal auditing staff
have full and free access to, and meet with, the Audit Committee, with and
without management present.
s/Barry J. Galt
Chairman, President and Chief Executive Officer
s/Robert W. Shower
Executive Vice President and Chief Financial Officer
s/Rodney W. Bridges
Vice President and Controller
SEAGULL ENERGY CORPORATION
61
<PAGE> 44
CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Seagull Energy Corporation:
We have audited the accompanying consolidated balance sheets of Seagull
Energy Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Seagull
Energy Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Notes 10 and 12 to the consolidated financial
statements, respectively, the Company adopted the provisions of the Financial
Accounting Standards Board Statements of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and
No. 109, Accounting for Income Taxes, in 1992.
/s/ KPMG Peat Marwick LLP
Houston, Texas
January 27, 1995
SEAGULL ENERGY CORPORATION
62
